Can we claim back the VAT?

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    Can we claim back the VAT?

    We are 3 Leaseholders each with a share of the freehold of our shared building. Purchase of our flats meant we also became Directors of a dormant Management Company. We need urgent maintenance/Major Works doing and wondered how and if we can claim back the VAT charged by the builder(s).

    We thought we could restart the management company, set up a bank account for it, register for VAT, then run the maintenance costs through the company and reclaim the VAT. Funding for the work would come from the leaseholders via donations to the management company, rather than via service charges (although I understand these are not vatable anyway).

    Advice is varied and confusing. Eg, the management company cannot register for VAT if it is not selling anything. Also in this forum I've read that the 'end-user' has to pay the VAT, even though service charges are not vatable – implying that the MC is the end-user rather than the leaseholder.

    So either way, whether as leaseholders or freeholders, we cannot avoid the VAT. Is that correct?

    No, the lessees pay the VAT. The MC is not the end user, they are simply the custodian of lessees' cash. Don't try to do silly things.


      Your lease should require the leaseholders to pay annual service charge contribution to the management company.

      To keep the non-profit making Management Company dormant which is easier for filing annual returns to Companies House, the service charge money collected from the leaseholders has to be kept separately in the management company's bank account named "Client Account".

      You have to keep records of annual service charge and monies collected from the leaseholders and any arrears in payment.

      This may seem unnecessary work but when you come to sell, your prospective buyer may require mortgage loan from a lender which asks to see 3 years service charge accounts.

      Any maintenance costs including VAT are paid from the service charge bank account so leaseholders will pay for the VAT.


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