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Vat Shelter Agreement

By 2021-10-13 No Comments

If the tax authorities` decision is upheld, the impact on the sector will be very important, both for existing associations and for future share transfer federations. In the longer term, members have confirmed to us that the revenue sector`s decision will result in the withdrawal of hundreds of millions of pounds from the sector, effectively neutralising all the benefits of the VAT protection system. To this extent, there will undoubtedly be a great influence on the sector`s ability to provide decent housing standards, especially when corporate tax commitments exceed the savings made by VAT Shelter. Indeed, if an optimal investment in tax development is made for the financial year 2020, instead of a corporate tax advance payment of 75% of the tax burden initially estimated, it would be expected to reach 12 at the latest. on April 1, 2020, called “tax deposit 1”, only a tax deposit of 45% of the anticipated tax debt in the first quarter is sufficient to avoid a tax increase due to the absence or insufficiency of corporate tax. Down payment. KPMG, the audit firm that played an important role in shaping the VAT protection system, then met with the tax office and explained in detail why they felt that the interpretation of the tax system was wrong or, at the very least, could be subject to an alternative interpretation. The revenue rejected KPMG`s argument, arguing that the entire “gross amount” that the housing company pays to the municipality should be regarded as a cost of acquiring the real estate. In this context, no discharge is allowed for the stock of revenue from sanitation expenditure.

Instead, discharge is only possible against any profit from the sale of the property if it is sold. As regards the transfers currently planned by local authorities, most, if not all, of which will use the VAT-Shelter scheme, there are already considerable uncertainties and some questions as to whether neutralising the Shelter agreement will itself call into question the proposed transfer. Increasing corporate tax and reducing VAT protection It really depends on the contracts and there will be different results in different cases. As a very broad approach, there is no need to adjust the developer`s input VAT, as long as there is an agreement between the developer and the customer: shared ownership systems are agreements in which people who cannot afford to buy real estate directly and qualify for the program can gradually acquire equity in a property from RSL. For each agreement, there will be a joint lease agreement with a term of 99 to 125 years. It provides that the tenant pays a premium for an initial share of the equity (between 25% and 75%) and for the rest for the rent. Other premiums can be paid a posteriori for additional shares of the equity with a proportional reduction in rent until the tenant has acquired a 100% share. The rental agreement may provide for a transfer of ownership as soon as this has been achieved. For the last non-profit transfer organisations that have used the VAT protection regime, this decision seriously undermines viability. All of these organizations have long-term business plans based on transfer forecasts that have been agreed with Housing Corporation in accordance with the ODPM`s share transfer policies. This includes the assumption that the normal rules for calculating corporation tax would apply.

The tax authorities` decision not to follow the “normal rules” means that some of our members are already facing punitive impositions this year that cannot be avoided. There were a few suggestions: If the client cannot pay once completed and the transfer is delayed, is it possible that the client finds the tenants and discards the usual rental agreements with them, but since the developer still has ownership of the property, who delivers what to whom during an intermediate period between completion and transfer? If a Belgian company does not have sufficient liquidity to make sufficient and timely advances on corporate tax or if it prefers to obtain cash in the company as much as possible, it could consider making an investment in a tax haven with a recognized producer of audiovisual works or a stage producer. . . .

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