Chance to capture some value from Darling’s 2.5% VAT cut

Farmers who have had building work carried out in recent months could make a retrospective claim for 2.5% of the VAT, following the Chancellor’s decision to lower the tax rate, says one accountant.

As long as work was still under way on 1 December, landowners could recover the 2.5% reduction in VAT, announced in November’s Pre-Budget Report, for the whole project. “Building work is treated as one supply, so you can reclaim the VAT regardless of when work began, or whether you have paid a deposit in advance,” said Mike Butler of Old Mill Rural Services.

“This will be particularly beneficial for work on which VAT is not normally recoverable, such as rental properties, farm workers’ cottages, house extensions, or DIY horse liveries.”

By claiming back the VAT reduction on a £100,000 project, farmers would save £2500. However, regular “stage” payments for work carried out before December, and materials bought for DIY work, would not qualify, he said.

Any guns who had paid for days’ shooting or an entire season could also claim the VAT back, for any days held on or after 1 December, added Mr Butler. “Even if you’ve paid on account for the whole season you are entitled to go back and get the VAT reduced to 15%.” For example, someone who paid £5000 for a season could claim the VAT back for any shoots held on or after 1 December.

“In this time of the credit crunch anyone looking to help out their customers is seen as acting favourably – shoot organisers could offer this reduction and use it as a deposit on next year’s shoot,” said Mr Butler.