VAT on deregistration - Elected property

VAT on deregistration - Elected property

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Property purchased 1997 with no input tax as previous owner had not elected.

Shortly after £60k spent on a new roof. An election was made to tax the property and vat on the repairs reclaimed.

The owner is a director of a trading company and the company trades from the premises. Rent has been charged in some years at varying amounts always at or below market rent. Vat charged on rent and paid over. The election can be revoked Oct 2018.

It is established that if the property were sold output vat would need to be accounted for.

What I wish to establish is whether there would be a charge of output vat on the property if deregistarion took place either voluntarily or forced by HMRC.

VATSC23600 appears to me to suggest it would not as vat not claimed on purchase. "Queries on assets at deregistration"

Any comments please?

Replies (4)

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chips_at_mattersey
By Les Howard
25th Sep 2013 15:54

'Deemed supply' on deregistration

I agree with you VATSC23600  is pretty clear, even though it seems to fly in the face of the legislation. Having said that, I have successfully used the concession when deregistering a property-owning business.

If you do follow the HMRC guidance, do take a print of it, as it might be changed at a later date!

Thanks (1)
By pushtheriver
25th Sep 2013 16:19

Thank you Les

Thanks

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By Paul Soper
25th Sep 2013 16:33

IF you deregister

If you deregister the property remains subject to the option.  On sale it would, unless you deopted, produce a turnover large enough to oblige you to register immediately to account for VAT on the sale.  This is a trap which should be better known as contracts for the sale of property usually make any taxable sale final and not subject to revision upwards even if it is subsequently discovered that a liability arises.

Thanks (1)
By pushtheriver
25th Sep 2013 17:00

No intention to sell

Thanks Paul

In this case there is no immediate intenstion to sell. The fear was that on deregistration the client would have to account for the vat as in the case of stock and other assets held.

However thanks for the heads up as the client will need to be aware if a sale is made before the he has the chance to deopt in 2018.

 

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