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    • dboswell
    • By dboswell 14th May 18, 6:00 PM
    • 269Posts
    • 62Thanks
    dboswell
    Reclaiming VAT on Property Purchase
    • #1
    • 14th May 18, 6:00 PM
    Reclaiming VAT on Property Purchase 14th May 18 at 6:00 PM
    I visited a commercial property which I am interested in purchasing however, I am still thinking over the figures.

    The agent told me that it is elected for VAT

    I understand that SDLT is due on the amount including VAT.

    I am thinking of setting up a company to purchase the property.

    Am I correct that if I VAT register a new company then I can reclaim the VAT on purchase?

    The vendor has it occupied and will vacate in October and would complete the sale at the same time.

    What is the standard timescale for payment and reclaim of VAT?

    The listed price is 400,000
Page 1
    • 00ec25
    • By 00ec25 14th May 18, 11:37 PM
    • 6,379 Posts
    • 5,888 Thanks
    00ec25
    • #2
    • 14th May 18, 11:37 PM
    • #2
    • 14th May 18, 11:37 PM
    I visited a commercial property which I am interested in purchasing however, I am still thinking over the figures.

    The agent told me that it is elected for VAT
    for how long? Have you explored the possibility of revocation?
    https://www.gov.uk/government/publications/vat-notice-742a-opting-to-tax-land-and-buildings/vat-notice-742a-opting-to-tax-land-and-buildings#revoking-an-option-to-tax

    I understand that SDLT is due on the amount including VAT. correct
    https://www.out-law.com/topics/tax/property-tax-/stamp-duty-land-tax/

    I am thinking of setting up a company to purchase the property. there may be advantages to a company owning it, there are disadvantages though, so is that an informed decision or do you not know what is what yet? What is your business, why can't you be a VAT registered sole trader?

    Am I correct that if I VAT register a new company then I can reclaim the VAT on purchase? yes, see above VAT notice for the detailed rules

    The vendor has it occupied and will vacate in October and would complete the sale at the same time.

    What is the standard timescale for payment and reclaim of VAT? whatever you agree with HMRC, the "norm" is quarterly, but you can get monthly if you ask.

    The listed price is 400,000 presumably + VAT?
    Originally posted by dboswell
    so that's "only" 13,500 SDLT then

    alternatively, are you buying the property and the business carried on there as a "going concern"?
    Last edited by 00ec25; 14-05-2018 at 11:46 PM.
    • dboswell
    • By dboswell 15th May 18, 7:39 AM
    • 269 Posts
    • 62 Thanks
    dboswell
    • #3
    • 15th May 18, 7:39 AM
    • #3
    • 15th May 18, 7:39 AM
    The building is currently an office and is being sold vacant.

    At the listed price, the VAT would be 100,000.

    Would that be payable just after 31 December and could be recoverable in January 2019? This will be very very difficult on our cash flow to find.

    Does it have to be paid over if recoverable or is there a process of submitting a return without payment?

    The current owner has been charging VAT on the tenants for some years now. I assume that will effect revocation possibility.
    Last edited by dboswell; 15-05-2018 at 7:42 AM.
    • 00ec25
    • By 00ec25 15th May 18, 3:02 PM
    • 6,379 Posts
    • 5,888 Thanks
    00ec25
    • #4
    • 15th May 18, 3:02 PM
    • #4
    • 15th May 18, 3:02 PM
    sorry but for the sums of money you are talking about, and your evident lack of basic knowledge, you should not be trying to do this on the back of sketchy & incomplete (but free) advice from a forum.

    Employ a professional adviser to handle it for you
    • AuntyCat
    • By AuntyCat 15th May 18, 6:58 PM
    • 316 Posts
    • 477 Thanks
    AuntyCat
    • #5
    • 15th May 18, 6:58 PM
    • #5
    • 15th May 18, 6:58 PM
    As the vendor has opted to tax the property they must charge VAT on the sale to you unless they are selling as a going concern, which it does not appear they. If it was being sold as a going concern it could be sold without VAT - but there are strict rules for the taking over of a going concern (TOGC) in VAT.


    If you were VAT registered you could then reclaim the VAT.


    The previous poster is correct you need professional advice.
    • gingercordial
    • By gingercordial 18th May 18, 12:53 PM
    • 1,143 Posts
    • 1,192 Thanks
    gingercordial
    • #6
    • 18th May 18, 12:53 PM
    • #6
    • 18th May 18, 12:53 PM
    I visited a commercial property which I am interested in purchasing however, I am still thinking over the figures.

    The agent told me that it is elected for VAT

    I understand that SDLT is due on the amount including VAT.

    I am thinking of setting up a company to purchase the property.

    Am I correct that if I VAT register a new company then I can reclaim the VAT on purchase?

    The vendor has it occupied and will vacate in October and would complete the sale at the same time.

    What is the standard timescale for payment and reclaim of VAT?

    The listed price is 400,000
    Originally posted by dboswell
    You will pay the VAT when you pay the seller for the building itself - they will invoice you for the amount plus VAT.

    Be very careful in assuming you can reclaim this. You talk about "VAT registering a new company" but that is not enough.

    There is a thing called the Capital Goods Scheme which applies to property purchases where the price (without VAT) is over 250,000. In these cases you can only reclaim the VAT if you use that property for a business which makes VAT-able supplies, eg

    - You use it as an office for your business which is VAT-registered and sells widgets which are subject to VAT; or

    - You also make an election to opt to tax, and rent it out and charge your tenants VAT on the rent.

    You can't just have the VAT back by simply VAT-registering yourself/a company if you are not also then using the building for VAT-generating purposes.

    You are also required to keep records of this for ten years, so if in year 9 you stop using it in a VAT-able business you will need to repay some of the reclaimed VAT.

    As others have said, you really need some proper, paid-for advice.
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