A limited company carries on exempt supplies but client wants to purchase a commercial building to house the offices.
Options are:
- Through existing limited company but presumably no VAT recovery
- Personally
- Through a new limited company which could register for VAT
I am comfortable with the income and capital gains advantages and disadvantages but less sure on the VAT position. The client will be charged VAT and the property concerned is over £250k before VAT. The property is over 3 years old.
I am not confident with IHT and SIPP issues so will advise that the client takes specialist advice. Any tips on how to do this without looking inept? I do not have enough experience to advise on the above but does it look like he's engaged a sub standard accountant if I have to pass them on (I have no choice as there is too much money involved).
Essentially I want to give him the facts that I know on the subjects I can deal with (any help on the VAT issue would be welcomed) but pass him on to someone who knows better for the bits I can't do whilst retaining him for accounts and tax returns that I currently do.
I would appreciate any comments you have
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What taxable supplies will the new company by making, or intending to make?
Property can be a minefield. Don't be afraid to tell your client that it is a specialist area and that they will need paid for, specialist advice.
Well you can only recover any VAT charged on the purchase if you opt to tax. If you opt to tax, you will need to charge VAT on the rent for the next 20 years. You need to be careful to not fall into the OTT anti-avoidance provision though.
Additionally, if VAT is charged on the purchase, there will be additional SDLT on the VAT.
Now, if it were a TOGC you would not have the latter issue...
And that is where specialist advice comes in, asap.
He can buy the property personally, register for VAT personally, opt to tax and reclaim the VAT on the purchase price. He will, however, need to charge VAT on any rent or on any subsequent sale for the next 20 years (until the option to tax can be revoked).