I intend to purchase a house at auction, that is being sold by the local council. It is and always has been a residential property, but for some reason the council has opted to charge VAT on the sale price. They have provided a copy of their VAT 1614A form declaring their option to tax, and they have not made any exempt supplies in the last 10 years. Putting aside the legitimacy of taxing the sale in the first place, what is the process for claiming this back? I am not buying the property for business purposes and won't be renting it out, so unless I start a VAT registered business in the basement then I'm not going to be able to claim the VAT back!
Is there any standard process for reclaiming the VAT due to the fact it should technically be an exempt sale? Or is the fact the council are opting to add tax simply mean I have to pay it and put up with the extra cost?
Replies (7)
Please login or register to join the discussion.
If the property is a dwelling then the Council's option has no effect. Tell them to go and whistle for the VAT. And if they resist, stick a 1614D under their noses.
The VAT 1614D has no effect in this case as you cannot disapply an option which does not exist in the first instance. You need to speak to the auction house and inform them that the house cannot be sold with a VAT charge because VAT cannot be applied. They will need to speak to the Council to get the price back to being exempt from VAT.
Almost correct, Shaun. I think you meant to say 'apply' rather than 'exist'. As you well know, I could legitimately opt to tax your own house if I wanted to. Of course that option would have no effect until such time as I was able to grant an interest in the property at a time when it was no longer a dwelling. But the option would nevertheless exist.
But I agree that you cannot disapply an option that doesn't apply in in the first place. The correct procedure is of course to convince the council/auctioneer of the error of their ways. My suggested use of form 1614D was in part tongue-in-cheek and in part a belt and braces approach.
Are you sure the property is a dwelling? Might it have been used by the Council for something else and have a different planning status?
On the face of it having an option to tax on a dwelling appears very strange which makes me suspect that possibly, whilst it looks like a dwelling, it is not a dwelling.