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Vat on purchase of commercial property

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Vat registered co buys a property that has been opted to tax to trade from for 285000 incl of vat . Vat is claimed back on VAT return. 

 

12 months later company moves out and leases the propertyto a third party. An option to tax is now needed to ensure the vat is not repayable ? 

 

If if they choose to lease out straight away option to tax needed straight away if they want to claim back VAT ? 

 

how does the capital goods scheme fit in? Or as the purchase price is below 300k inclusive do I not need to worry about it? 

 

Thanks for any input 

 

jon

Replies (8)

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chips_at_mattersey
By Les Howard
08th Aug 2018 21:06

You will need to check that your Option to Tax is not disapplied. There is anti-avoidance legislation to consider.
The Capital Goods Scheme threshold is £250,000, so it must also be considered.
I would expect your Standard Enquiries to ask the correct questions, but you may need professional input for your answers.

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Replying to leshoward:
By Ruddles
08th Aug 2018 21:48

£285k “inclusive” of VAT

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By jonibarnes
08th Aug 2018 22:08

reading that back I appreciate I have not worded it very well.

VAT registered Company is buying a property that the current owner has opted to tax. The sale price is 285k including VAT.

The company buying will be making fully taxable supplies from the new premises and is VAT registered. My understanding is that the input VAT of £47500 can be claimed back through the companies VAT return. No option to tax is needed by the new owner.

Now I imagine in a couple of years the new owners decide to move out of the property and lease it to a third party the rental income will be exempt from VAT as no option to tax has been made.

Does the company at this point have to opt to tax in order not to have to pay the VAT of £47500 back or as the sale price is 285k and below the 300k figure for the capital goods scheme is no option to tax needed ?

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Replying to jonibarnes:
By Ruddles
09th Aug 2018 07:55

Since the VAT-exclusive consideration is less than £250k no option to tax is required to protect recovery of the input VAT on purchase (provided that the purchase was in a prior VAT year).

Exempt rents may of course impact on future input VAT recovery.

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By jonibarnes
09th Aug 2018 08:15

Thanks les much appreciated

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Replying to jonibarnes:
By Ruddles
09th Aug 2018 08:21

No problem, Mike

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Replying to Ruddles:
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By jonibarnes
09th Aug 2018 09:18

Apologies Mike!

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Replying to Ruddles:
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By jonibarnes
09th Aug 2018 09:18

Apologies Mike!

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