FAQs
N.B. These FAQs will indicate the Revenue practice on particular topics. However, due to the number of different factors that may influence tax matters, you should contact your local tax office before you make any decision that may affect your tax status.
I have built a new house in my garden. Do I have to charge VAT when I sell it?
Yes... if you build a house in your garden with the intention of selling it you must charge VAT at 13.5% on the sale. You should register for VAT before you start the project since you would be entitled to recover VAT incurred on the building costs. If the house was built with the intention to rent it out you are not entitled to recover VAT on the building costs, and there is no VAT chargeable on the rent (see below). However, even where the original intention was to rent the house, if you sell the house within five years after it has been completed you are obliged to charge VAT on the sale. In this situation, you are entitled to a deductibility adjustment-ecovering a proportion of the VAT incurred on the building costs-at the time of the sale.
Prior to April 2007, if you built a house with the intention of letting it out, you could choose to register for VAT, claim back VAT on the building costs, and charge VAT on the rent. This option is no longer available following a change in the legislation.
Please also note that if you simply sell part of your garden to a builder for him or her to build on, there is no VAT on the sale of the site.
I registered for VAT to buy or build a house/apartment, which I have been letting out to tenants. If I have no tenants do I have to cancel the VAT registration and pay back VAT to Revenue?
Prior to April 2007, a person who intended to let out residential property was entitled to register for and reclaim VAT on the building or purchase of the property. In this situation, VAT must be charged on the rent, and on any subsequent sale of the property. If you have been letting out such a property, and now find that you are unable to attract tenants, you should stay registered for VAT, and continue to submit VAT returns, even though the amount returned is nil. You should note the following:
- If you let the property to a brother, sister, child, grandchild, parent or grandparent (or certain other "connected persons") you will be obliged to set the rent at a level that would assure that the net amount of VAT claimed back by you on the property would be repaid within 12 years of your acquisition of the property. Otherwise, the waiver of VAT exemption will be immediately cancelled for this property and the net amount of VAT deducted on it will become repayable.
- If you sell the property, you must account for VAT on the sale. If you wish to 'deregister' for VAT prior to the sale in order to avoid this, you will be required to repay the net amount of VAT previously reclaimed.