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VAT of pub flats being flipped

slightly more complicated, advice would be helpful ...

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A property developer client is going to buy 2 flats above a pub from pubco, in the name of devco, +VAT (OTT on the pub). There will be 4.5 months inbetween exchange & completion, during which time devco will do a decent amount of renovation works. Flats in unhabitable condition on exchange.

Devco will then back-to-back on the completion to (unrelated) Mr X, who will let them as student flats.

1. Am I right in thinking that whether-or-not a 1614D is provided to pubco, when devco sell to Mr X, the sale is exempt?

2. Does it make a difference if the flats are already already tenanted when sold to Mr X?

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By nkwayne
03rd May 2018 15:20

My recent experience of something similar leads me to believe:

1) when devco sells the flats, they are dwellings, but they are not newbuild therefore they are exempt.

2) because they are exempt, devco can't claim the vat input tax on any works it undertakes on them. They might be able to obtain lower vat rate on works by contractors if the flats are being brought back into habitable condition after a long enough uninhabited break.

3) because they are bought with the intention of sale as dwellings, devco can't claim the vat back if any were charged by pubco

4) therefore the VAT1614D is essential to mitigate the unrecoverable costs to devco.

I had an interesting discussion bordering on stand up argument with my Pubco's solicitors, who wanted all sorts of stuff to support the VAT1614D when my reading is that the only document that is required is the VAT1614D which then asserts the intention to sell on as dwellings. Would be interested to know if others agree with me, or whether Pubco's solicitors were correct that they wanted plans, and permissions, and all sorts of other junk to prove what the position was.

Hope that helps.

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Replying to nkwayne:
ALISK
By atleastisoundknowledgable...
03rd May 2018 17:47

Thank you very much - an excellent response!

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chips_at_mattersey
By Les Howard
03rd May 2018 16:02

Sale of occupied flats is probably a TOGC, which means input tax is residual, rather than directly attributable.
But really needs a specialist to look at the options for you.

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