VAT treatment of sale of part interest in opted property

VAT treatment of sale of part interest in opted...

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My client owns a commercial property which is leased to an unconnected tenant, with about 5 years left on the lease . The client plans to sell a 20% beneficial interest in the property to his pension scheme. The property has been opted to tax by the client. Does he need to charge VAT on these proceeds or will it qualify as a TOGC?

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By User deleted
09th Jun 2014 16:18

I would say ...

... not a TOGC, so VAT chargeable.

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By Alastair Johnston
09th Jun 2014 16:39

Partnership?

Where is the whole or part of a business which is being transferred?  The letting will obviously continue but will the current 100% owner still be responsible for invoicing all of the rent and handling the payments?  If so, the pension scheme might not be said to have a business at all.  That would mean no TOGC.  Sale of a 20% interest seems to me more like the sale of an asset of the business than a TOGC of part of a business. 

 

Will the current owner and the pension scheme enter into partnership together to let the property?  If so, should there be a partnership VAT registration and there could perhaps be a TOGC to it.  And if the current owner makes no other taxable supplies then perhaps he could transfer his VAT regsitration to the partnership. 

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Replying to richisb:
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By broadsides
09th Jun 2014 17:10

The proposed set up is as follows:

1. The present owner will remain as the registered owner and hold the property on a bare trust for themselves and the pension. In that capacity they will be responsible for invoicing for whole of the rent and accounting to HMRC for the VAT. However this will be done under a new VAT registration (see 2)

2. A new VAT registration will be set up as a partnership with the partners being the 2 beneficial owners (these will be the names on the VAT 2 form).

3. An option to tax the property will be submitted by the new "partnership" along with the application for registration.

4. The pension scheme will take no active part in the rental operation but will receive the benefit of its share of the rental income.

 

Your input is much appreciated.

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By Alastair Johnston
10th Jun 2014 13:08

That's a TOGC
You should be able to TOGC the property to the partnership. P'ship VAT reg application should be completed on that basis.

If the value of the 20% interest is £150,000 or more (incl VAT), then the TOGC saves you some SDLT as well as easing the cash flow.

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