Not told of VAT on land purchase

mosaicsquares

Hi, I'm buying a tiny piece of land, just 3/4 acres. On the estate agent details there was no mention of VAT on sale, mining rights to be excluded from sale, and that it is under Farm payment scheme and greening scheme so I can't do anything with the land until Jan 1st 2021.
 None of these things were mentioned verbally and so I put in a high offer in good faith to take it off the market. All these things have now come to light in the 1st draft contract, but I've incurred fees already. I was told about the Overage which in itself is onorous. 
Do you think any of this is good practice/fair and how should I handle this? I've already told the agents I can't afford VAT and they know this because they only checked my account for my offer price, no more.. 
How to proceed, and would it be reasonable to reduce the offer price?
Thanks

davidmcn

If you can't afford it then obviously you have to reduce the price (or walk away). You then risk competing with buyers who can outbid you because they're Vat-registered. 

eddddy

mosaicsquares said:

How to proceed, and would it be reasonable to reduce the offer price?

Everything is negotiable - including the price.

Assuming that it's the vendor that's introducing the overage clause (as opposed to a previous owner), you can say the proposed clause is unacceptable to you, and you won't buy unless it's changed/removed.

I don't know much about VAT on land, but this article suggests that the seller can choose to make the land subject to VAT: https://scott-moncrieff.com/news/news-updates/an-introduction-to-vat-and-commercial-property

The article also explains that it's probably a bad idea to charge VAT, if the buyer is unable to recover the VAT (which it sounds like you can't). So maybe the seller will change their mind when you explain. Although that might mean the seller can't recover some VAT that they've had to pay out.

davidmcn

eddddy said:

mosaicsquares said:

How to proceed, and would it be reasonable to reduce the offer price?

The article also explains that it's probably a bad idea to charge VAT, if the buyer is unable to recover the VAT (which it sounds like you can't). So maybe the seller will change their mind when you explain.

I expect the option to tax has already been done (possibly by a previous owner) in which case it can't simply be undone because it doesn't suit a purchaser. 

mosaicsquares

It's a huge estate selling this land, along with some much larger plots. Is it possible the estate agent didn't know about the VAT charge? Either way, should I have been told at the outset?

davidmcn

mosaicsquares said:

It's a huge estate selling this land, along with some much larger plots. Is it possible the estate agent didn't know about the VAT charge? Either way, should I have been told at the outset?

If you're buying development land then I think it's reasonable to assume that this is the sort of thing you can figure out for yourself - it isn't the agent's job to spoonfeed you every consideration about your costs in buying. And yes, the agent may well not have known whether there had been an option to tax. I can't see you have any cause for complaint unless the agent had told you there hadn't been an option to tax. 

martindow

The seller can't decide whether to charge VAT or not.  If they are registered they are obliged to.  If they choose to quote the gross figure then they wil discourage decent offers from VAT registered buyers.

Are you sure there is no mention of VAT on the sale particulars?  That would be very poor practice from the agent, not that that is totally unexpected from such an unregulated area of business.

mosaicsquares

It's all arable land, and the area I'm buying is amenity land with permanent grassland and wildlife benefits, mature trees. It doesn't state development land and neither does it say that on any of the 30+ acres for sale on the other plots. It's at the fringe of a village. I think it's just underhanded myself and they've shot themselves in the foot either way..I can't afford it. 

blue_max_3

Why not just register for vat for a year? Then you can claim it back.

Sibbers123

What do you plan on doing with the land? Depending on the answer to this, you could opt to tax the land yourself, and reclaim the VAT. 

It may even be a transfer of a going concern (unlikely on the basis of information provided), if so, no VAT is chargeable.

This isn’t something for the estate agent/vendor to sort out, you should engage a tax adviser.

davidmcn

Sibbers123 said:

It may even be a transfer of a going concern (unlikely on the basis of information provided), if so, no VAT is chargeable.

Even if it were a going concern, the buyer would have to be vat-registered before completion in order for the parties to claim the exemption.