VAT on Commercial property

VAT on Commercial property

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Hi there - I am looking to buy a property that may be registered for VAT, does anyone know where/how you check if the property is elected? Also if it is elected for vat and I convert the commercial units into residential, can you claim back the VAT you pay on the purchase price? Thanks

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By Alastair Johnston
25th Jun 2014 21:25

Ask the vendor

The only way to find out is to ask the vendor. HMRC will not tell you if the vendor has opted, as they view that to be confidential information. 

Get the vendor to exhibit his letter from HMRC acknowledging his OTT (or his Real Estate Election).  If he doesn't have it, get him to write to HMRC asking for an "option in place" letter.  Suc a letter will either confirm that according to HMRC's records the vendor has an OTT on the property, or it will say they have no record of it.  It will not categorically state that the vendor has not opted to tax.  This should all be standard stuff for the vendor's lawyer. 

If you intend to convert the property from commercial to residential and either sell or grant a lease of over 21 years (20 or more in Scotland), then you can recover the VAT on the purchase price and associated costs.  However if you are newly VAT-registered and this will be your first big VAT reclaim, you should expect to have to deal with an HMRC enquiry before they repay. 

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By GuestXXX
17th Mar 2015 16:46

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By User deleted
26th Jun 2014 08:10

If you're intending to convert to residential ...

... you may be able to avoid having to pay VAT in the first place. Engage an adviser and he'll be able to explain how.

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