Care home VAT guidance
Beatons Group has significant experience on advising in the care home sector and a policy of providing clients with timely and proactive guidance on the ways you can avoid later pitfalls, by making you aware of relevant laws and regulations and knowing how to comply with them.
Why is this relevant to your business?
We can help you to identify where major VAT cost savings can be made on construction projects or creating additional accommodation at a care home. The average self-build property costs £164,000 when using building contractors, so an additional £32,800 per property would be charged if VAT is applicable.
General tax rules
Care homes are exempt for VAT purposes which mean they cannot reclaim VAT on their construction costs. You may not be aware, though, that residential property is zero rated for VAT purposes and this means that the VAT costs made be saved on some properties that a care home business builds.
Care home construction
A number of care homes are now constructed on the basis of a single main nursing home, with outlying individual homes. Often these are self-contained flats or houses on the same grounds as a main building, where the residents can access support services like a warden or a caretaker. The question we are frequently asked is whether these individual homes can be constructed and VAT saved on their construction.
The answer is that it depends on whether or not these individual homes are part of the main property or not, both in physical terms and wider, day-to-day relationship terms.
If the residents of the outlying homes have rights to care as part of the purchase of the property, if the property cannot be sold independently from the care home, if planning permission was provided for the houses with the restriction that they are only used by the care home, those circumstances all mean that the construction is not a “new residential property” but is merely an extension of the original main building for tax purposes. That means the zero VAT rating will not apply so VAT cannot be saved on the construction costs.
How to get it right and make major tax savings
- Get your Planning consent right. Negotiate with the planning department to ensure that the properties are not attached to the main care home.
- Get the architects to design the homes such that they are not physically attached to the main property and, equally, design all the necessary amenities so residents are not dependent upon the main care home.
- Ensure that any contracts for sale for the properties do not create any binding tie with the care home in connection with services.
VAT can also become a significant issue regarding agency workers in the care industry. We also have expertise on that and are happy to advise you.
If you’re still not sure about whether VAT should apply, what should you do?
Get in touch with Andrew Diver at Beatons Group. His years of experience as a Tax Director mean you can be advised on how to be well prepared, so you reduce the risks of any inadvertent error or challenge from HMRC.
The content of this newsletter is intended for general information purposes only. You should always seek appropriate professional advice before acting. No responsibility is taken for any loss as a result of any action taken or refrained from in consequence of the contents of this article.