Advanced Guide to VAT on Property, Imports, and Digital Services

Advanced VAT reclaims covering property, imports, and digital services represent some of the largest VAT refund opportunities — and also some of the highest compliance risk areas in the UK VAT system.

Mistakes in these areas regularly result in:

• Six-figure HMRC assessments
• Denied VAT refunds
• Long retrospective VAT audits
• Penalty and interest exposure

In this technical guide, Audit Consulting Group – Accounting and Tax explains:

• How VAT on new build commercial property works
• When you can reclaim VAT on commercial property
• How reclaiming VAT on imported goods works using Postponed VAT Accounting
• How VAT on digital services B2B after Brexit must be treated
• How to stay compliant while maximising VAT recovery

VAT on Commercial Property: One of the Most Complex VAT Areas

Property VAT in the UK is highly technical. Some property transactions are:

• Standard-rated
• Zero-rated
• Exempt

And the VAT outcome depends entirely on:

• The nature of the building
• The type of supply
• Whether an option to tax has been exercised
• How the property is used

VAT on New Build Commercial Property

One of the most valuable VAT recovery opportunities is on new developments.

VAT on Commercial New Build

In most cases:

• VAT on commercial new build is charged at 20%
• This includes:
  • Construction services
  • Professional fees
  • Materials incorporated into the structure

If the building is used for taxable business activity, you can usually:
Reclaim VAT on new build commercial property in full

This is one of the largest single VAT refunds many businesses ever receive.

Residential New Builds

By contrast:

• Residential new builds are generally zero-rated
• This means:
  • No VAT is charged
  • But equally no VAT is recoverable

Mixing commercial and residential use creates partial exemption and CGS exposure.

VAT on Repairs vs Capital Improvements

This distinction is critical:

• Repairs & maintenance → normally standard-rated VAT
• Capital improvements & alterations → VAT treatment depends on structure and usage

Incorrect classification is one of the biggest HMRC challenge points in property reclaims.

Property VAT, Partial Exemption & Capital Goods Scheme

If a property is used for both:

• Taxable supplies, and
• Exempt supplies

The business becomes partially exempt, meaning:

• Only a proportion of VAT can be reclaimed

For large properties over £250,000:

• Capital Goods Scheme (CGS) applies
• VAT recovery is adjusted:
  • Over 10 years
  • Based on changing usage

This means:
✅ VAT refunds may arise years after purchase
❌ Or VAT may need to be repaid unexpectedly

Reclaiming VAT on Imported Goods

Since Brexit, reclaiming import VAT has become one of the highest-risk VAT compliance areas.

When goods enter the UK:

• Import VAT is charged at the border
• It is usually reclaimable, provided:
  • The business is VAT registered
  • The goods are used for taxable supplies

This process is known as reclaiming VAT on imported goods.

Postponed VAT Accounting (PVA)

Most UK importers now use Postponed VAT Accounting, which allows:

• Import VAT to be:
  Declared on the VAT return
  Reclaimed on the same return
• No upfront cash payment at customs
• Huge cash flow advantage

However, PVA requires:

• Monthly C79 import VAT statements
• Accurate VAT return box entries
• Matching customs values to VAT records

Errors here commonly trigger:

• HMRC import VAT audits
• Denied VAT recovery
• Severe penalties

Reclaimable Import-Related Costs

In addition to import VAT itself, VAT may be reclaimable on:

• Freight charges
• Customs handling fees
• Storage charges
• Shipping insurance

The VAT treatment depends on how suppliers invoice these services.

VAT on Digital Services B2B After Brexit

VAT on digital services B2B after Brexit follows new place-of-supply and reverse charge rules that many businesses still apply incorrectly.

This affects:

• Software subscriptions
• Cloud platforms
• SaaS products
• Website hosting
• CRM systems
• Digital advertising
• Marketing platforms

This area is commonly referred to as:

• b2b digital services VAT
• vat on digital services business to business

UK vs Overseas Suppliers — Key VAT Difference

UK Suppliers

• Charge UK VAT at 20%
• VAT is reclaimed normally via the VAT return

Overseas Suppliers (EU or Non-EU)

• VAT is often not charged
• Instead, the reverse charge applies
• You must:
  • Declare output VAT
  • Reclaim the same amount as input VAT (if fully taxable)

This entry appears:

• In both Box 1 and Box 4
• And also impacts Box 6 and Box 7

If your business is partially exempt, reverse charge VAT may become partly irrecoverable.

Common Reclaimable Digital Business Expenses

VAT is commonly reclaimed on:

• Accounting software (Xero, QuickBooks)
• CRM systems
• Project management platforms
• Email marketing tools
• Cloud storage
• Website hosting
• Paid digital advertising platforms

Valid electronic VAT invoices and correct supplier location are essential.

Frequent HMRC Errors & Disallowed VAT Claims

HMRC regularly disallows claims due to:

• Incorrect property VAT classification
• Claiming VAT on exempt residential use
• Poor CGS tracking
• Missing import VAT statements
• Incorrect use of PVA
• Misapplied reverse charge on digital services
• Claiming VAT on overseas invoices without legal entitlement

These errors often result in:

• Retroactive VAT assessments
• Blocked VAT refunds
• Multi-year financial exposure

Why These VAT Reclaims Require Specialist Advice

Property, imports, and digital VAT reclaims involve:

• Construction VAT law
• International supply rules
• Capital Goods Scheme
• Partial exemption
• Reverse charge mechanism

These are not safe DIY VAT areas.

How Audit Consulting Group Supports Advanced VAT Reclaims

At Audit Consulting Group – Accounting and Tax, we provide:

✅ Commercial property VAT structuring
✅ New build VAT reclaim planning
✅ Import VAT and PVA compliance
✅ Customs documentation audits
✅ Digital services reverse charge reviews
✅ CGS and partial exemption modelling
✅ HMRC VAT enquiry defence
✅ Retrospective VAT refund claims

We help businesses:

• Recover maximum lawful VAT
• Avoid hidden tax liabilities
• Stay fully compliant post-Brexit

Contact Audit Consulting Group

Audit Consulting Group – Accounting and Tax
+44 7386 212550
info@auditconsultinggroup.co.uk

If your business imports goods, invests in commercial property, or relies heavily on digital platforms, a specialist VAT review could unlock substantial VAT refunds while protecting you from serious HMRC risk.