Opting to tax and connected party

Opting to tax and connected party

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Hi guys,

Does anybody know of any reason that a company would not have to opt to tax a new-build commercial property that is to be let at arms length to a trading subsidiary - yet still be able to recover 100% of the input tax.

The only 'trade' of the parent is rental of Land and Buildings - fully exempt unless OTT is elected.

The companies do not form a VAT group and are each individually VAT registered.

Any more info required please ask.

Many thanks

B-Man

Replies (8)

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By User deleted
21st May 2013 11:12

How long ...

... is the lease?

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Replying to Wanderer:
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By User deleted
21st May 2013 11:16

The building hasn't been built yet. The lease is likely to run for about 15 years with break clauses at years 5 and 10.

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chips_at_mattersey
By Les Howard
21st May 2013 11:26

Connected party rules

The connected party rules do not apply, as far as I can see. The tenant company has full VAT recovery, which is one of the key tests. But do monitor this, as any change in its activities can trigger the 'anti-avoidance' rules.

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By User deleted
21st May 2013 11:27

So who ...

... is suggesting that an option to tax will not be required?

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By User deleted
21st May 2013 11:31

[My manager]

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By User deleted
21st May 2013 11:36

Well ...

... either tell him/her that he/she is wrong or ask for an explanation.

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By User deleted
21st May 2013 11:38

I have done and have done.

But, thanks for your help..

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By DMGbus
21st May 2013 13:12

OTT not needed example

If a building is to be used mainly for warehousing or storage of goods then it's rental income is liable to VAT without the need for an option to tax.

 

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