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Claiming Vat on Purchase of Property

Simple Vat Registration or Vat registration along with option to tax

Hi

My client has incorporated a Ltd company and bought a retail unit. The company will own the property. The company had to pay Vat on the purchase and is looking to recover the vat by registering for Vat. The company intends to rent the building and charge vat on the rent. My understanding is that this cant be  achieved by a simple vat registration and the company has to exercise option to tax. Am i correct?

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01st Dec 2017 19:51

Yes, the company must opt to tax the property in order to charge VAT on the rent. Is the whole property to be rented out?

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By Ruddles
to the_drookit_dug
01st Dec 2017 21:55

Agreed- assuming that the retail property will be used for retail and not for some other purpose, eg storage.

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to the_drookit_dug
02nd Dec 2017 11:41

Thank you for your reply. The whole property is being rented.

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01st Dec 2017 22:48

Your client company is making Exempt supplies of rent so, yes, an OTT is required to recover any input VAT and this should be done before any supplies are made.

I take it there was not a tenant at date of sale? If there was ToGC may have been in point.

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to Kim Jong Un's Hair
01st Dec 2017 23:32

An option to tax would have been required to effect the TOGC in that situation also.

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to Kim Jong Un's Hair
02nd Dec 2017 11:42

Thank you for your reply. No TOGC in this case.

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By DJKL
to Kim Jong Un's Hair
02nd Dec 2017 12:16

Just to mention I have done a sale/purchase (into SIPPs) with no leases extant at time of sale as a TOGC, however we did need to demonstrate that there was a letting business, leases had been in place previously re all the units and the properties were being actively marketed to let.

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