Information Sheet 07/08 details Revenue & Customs’ policy for treatment of exempt supplies arising from recession in the new house market. This postulates that a developer needs to let a new house on a short let (exempt) before being able to sell the major interest to a purchaser (zero rated). The exempt income dilutes VAT recovery on related expenditure and, where VAT has already been reclaimed in full, a ‘clawback’ of some of the VAT claimed is the result.

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