The Background
VAT in property development can be a minefield. Between zero-rated, exempt, and standard-rated projects, it’s easy for even experienced accountants to miss opportunities - and that’s exactly what had happened here.
Our client, a residential property developer, had been advised that their projects were exempt supplies - meaning no VAT could be reclaimed. The result? Six figures of input VAT left unclaimed and growing cash flow pressure across their group.
The Review
During a routine quarterly review, our team decided to dig deeper. We revisited each development, asking detailed questions about:
The type of work being carried out - new builds, conversions, or commercial-to-residential schemes;
The end use of each project; and
The way the group companies were structured.
That analysis revealed a crucial oversight. Two of the companies were converting commercial properties into residential units for sale - meaning their outputs were actually zero-rated, not exempt.
The Solution
Once the correct VAT treatment was confirmed, we moved quickly to put things right.
Our team:
Completed backdated VAT registrations for both companies;
Prepared and submitted historic VAT returns to recover all eligible input VAT; and
Worked directly with HMRC during a subsequent inquiry - which we successfully passed.
The process not only reclaimed funds but also ensured full compliance for future developments.
The Result
£200,000+ of VAT recovered
HMRC-approved repayment following inquiry
Immediate cash flow boost and correction of prior incorrect advice
The Takeaway
VAT in property development isn’t just about compliance - it’s about opportunity.
By reviewing each project in detail and applying the correct VAT treatment, P10 helped this client recover over £200,000 of lost value and build stronger financial foundations for future growth.
Because in property development, the difference between “exempt” and “zero-rated” isn’t just a technicality - it’s six figures of working capital.
