Andrew Needham looks at how businesses can simplify accounting using composite VAT rates when making supplies of different VAT rates, particularly in the construction industry.
It is quite common for building projects to attract more than one rate of VAT on different elements of the development.
For example, a three-story property in London is purchased and consists of a retail unit on the ground floor and four residential apartments on the two floors above, two on each floor. The planned development will consist of the modernisation of the retail unit, the conversion of the four flats into two high-end apartments and the building of a new fourth floor containing a third new apartment.
The VAT liability of this project will depend on the work being undertaken. The refurbishment of the existing retail unit will be subject to standard-rated VAT of 20%, the work of converting the existing four flats into two apartments
