Buying Land that is VAT Registered

Oli_Jones

Hi all,

I am hoping to buy some land off a company to extend our garden. They have accepted the offer, but have 'warned' me that the land is VAT registered.

I am assuming that this means that I will have to pay VAT on the land? (Apologies for the obvious question!).

Also, as the land is currently not residential, would I need to register for change of usage? If so how much does this cost?

Many thanks, just nothing that I have every done before!

Oli

Miss_Samantha

Just reply that your offer is of course inclusive of any VAT as you aren't going to pay 20% over the land's value just because they have opted to tax.

rtho782

How is land vat registered? Businesses are VAT registered, not land.

Land transactions are usually VAT free.

https://www.gov.uk/government/publications/vat-notice-742-land-and-property/vat-notice-742-land-and-property

Oli_Jones

This was their reply:

Dear Oli

If you would like to pay us £*,*** plus legal fees this would be acceptable although I would warn you that the land is registered for VAT.

Futuristic

Oli_Jones wrote: »

This was their reply:

Dear Oli

If you would like to pay us £*,*** plus legal fees this would be acceptable although I would warn you that the land is registered for VAT.

Sounds like it's exclusive of VAT on that reply, I'd reply back stating your offer would be then inclusive of VAT.

rtho782

As per the link I posted, land transactions are not eligible for VAT.

Miss_Samantha

Oli_Jones wrote: »

This was their reply:

Dear Oli

If you would like to pay us £*,*** plus legal fees this would be acceptable although I would warn you that the land is registered for VAT.

This suggests that the price is indeed inclusive of VAT, which is fine. Probably best to have it confirmed.

What they mean, I think, is that the land has been 'opted in' for a long time so that it might remain so.
I don't know what the actual consequences could be, especially since you are not obviously registered for VAT. You could seek advice from an accountant to clarify this.

The option to tax on land transactions isn't a simple topic, from what I understand.

AdrianC

Oli_Jones wrote: »

This was their reply:

Dear Oli

If you would like to pay us £*,*** plus legal fees this would be acceptable although I would warn you that the land is registered for VAT.

Their reply makes no sense whatsoever.

The business selling it may be registered for VAT, in which case whatever they sell you would be liable for VAT - except for the minor detail that land sales are normally exempt, as that VAT notice linked to explains.

If they sell it to you and charge VAT, they have to give you a VAT invoice, with the VAT broken down. If they do, then you should pass a copy to HMRC, and ask them to investigate. The end result should be that you get the VAT refunded, and they get their wrist slapped.

daveyjp

Land owners can choose to either opt in or out of VAT for land sales. Whether they do or don't is down to how they manage their tax affairs.

Doing it is very simple, you just fill a form out. It is perfectly normal for large organisations/developers to do this.

You can check if the land is subject to VAT via HMRC in Glasgow.

Oli_Jones

Thanks all.

Daveyjp, if it is, do I pay the VAT on top of purchase price? Can I claim it back?

Oli

daveyjp

There will be 20% of VAT to be paid on the purchase price.

You can only claim it back if you have a VAT number.