VAT - Opt to Tax

Opt to tax building

Didn't find your answer?

Client looking to buy a building and the vendor wants to charge VAT on (opt to tax). Client looking at VAT charge of c£20k.

Client wants to convert the building into residential use. 

Can form VAT1614d be filled to avod being VAT charged as end use will be residential.

Is VAT 1614d binding on vendor ie  can he opt out it and still charge VAT?

Replies (2)

Please login or register to join the discussion.

VAT
By Jason Croke
13th May 2022 10:00

VAT1614D usually must be presented before the transaction completes but more often the vendor prefers the VAT1614D before the price is agreed, but generally vendor must accept it.

The problem is if the vendor accepts and exempts their supply, the vendor may have to repay input tax they previously reclaimed on the property (because the vendor is now making an exempt supply of what was previously a taxable/opted supply and so would have reclaimed input tax on the property previously), so the vendor may be out of pocket.

So the vendor may need to revisit the selling price to reflect the input tax that they have to repay to HMRC, it could be a few grand, it could be tens of thousands and the vendor isn't going to take a loss like that, so they could just pull out of the deal.

If the vendor can calculate their VAT loss and add this to the selling price, then there is no loss to the vendor and the sale can be exempt and whilst the buyer has to pay more, it'll still be less than an extra 20%.

Thanks (1)
avatar
By The Dullard
13th May 2022 10:18

So, the client is going to convert a commercial building into one or more dwellings? What will it do with the dwellings? Is it a company, that might now, or in the future, have a subsidiary? What are the possibilities of the vendor finding a short-term tenant before the sale? How much VAT are we talking about?

Thanks (0)