VAT reclaim and HMRC

Making Tax Digital for Property Companies

PropertyVAT Team · Updated 21 October 2026 · 2 min read

Making Tax Digital is a compliance requirement rather than a VAT planning question, but it intersects with property purchases at an awkward moment: the first return is usually the one claiming a large refund, and it is also the one filed under unfamiliar obligations.

What MTD requires

Two things, broadly:

Digital record keeping. Specified VAT records kept in a digital format, with digital links between systems rather than figures retyped from one place to another.

Filing through compatible software. Returns submitted via MTD-compatible software, not by entering figures into an online form.

Why property SPVs get caught out

A newly formed SPV buying one building is not what people picture when they think about digital record keeping. It has one significant transaction, no trading, and often no bookkeeping system at all.

But the obligation follows registration, not activity. An SPV that registered voluntarily in order to recover purchase VAT is a VAT-registered business and is within MTD.

Three common gaps:

• No software in place. The SPV was incorporated for the deal and never onboarded to anything.
• Spreadsheet-only records with no digital link to a filing mechanism.
• The accountant was never formally instructed for the SPV, only for the trading company.

The timing problem

The first return for a property SPV is usually a repayment return claiming a six-figure refund. Two things are therefore true at once:

1. It is the return you most want processed quickly.
2. It is being filed by an entity with no filing history and possibly no software.

A return delayed because nobody set up the filing mechanism is a refund delayed — and if the VAT is bridged, interest accruing for no reason.

Set it up at registration

The practical answer is to treat MTD as part of the registration task rather than a separate project:

1. Register the SPV for VAT when the deal is agreed.
2. Confirm who files, and in what software, at the same time.
3. Confirm the accountant is instructed for the SPV specifically, not just for the group.
4. Check the VAT return periods so you know when the first filing falls.
5. Assemble the evidence pack — VAT invoice, completion statement, registration, option to tax — before the period ends.

None of this is onerous. It goes wrong because it is nobody's named job.

Records worth keeping anyway

Independent of MTD, a repayment claim on a property purchase is likely to be verified. The records that satisfy MTD overlap heavily with the ones HMRC will ask for:

• The seller's VAT invoice
• The completion statement
• Registration details and effective date
• Option to tax notification and acknowledgement
• Professional fee invoices addressed to the SPV

Keeping these digitally and in one place serves both purposes, and turns a verification letter into a half-hour task.

Penalties

Late filing and late payment carry consequences under HMRC's penalty regime, and the rules have changed over time. The detail is a matter for your accountant.

The practical point for a repayment trader is simpler: a late return does not just risk penalties, it delays your own money. That is usually the more immediate cost.

This guide is general information, not tax advice. MTD requirements and penalty rules change — confirm the current position with your accountant.