VAT on a Commercial Property SIPP transaction
Discussion
On a commercial property purchase the VAT liability (if subject to the OTT) could run to six-figures.
If a SIPP was buying and it needed to max. out its borrowing capacity (1.5x) to cover the VAT inclusive price, the (VAT-registered) SIPP would then end up with a chunky VAT refund which could presumably be used to pay down some of the borrowings.
i.e,. the SIPP is obliged to fund the VAT liability and this could act as a brake if the prospective deal price plus VAT was more than the available firepower.
Is there anything more to it than this, other than the timing issues?
If a SIPP was buying and it needed to max. out its borrowing capacity (1.5x) to cover the VAT inclusive price, the (VAT-registered) SIPP would then end up with a chunky VAT refund which could presumably be used to pay down some of the borrowings.
i.e,. the SIPP is obliged to fund the VAT liability and this could act as a brake if the prospective deal price plus VAT was more than the available firepower.
Is there anything more to it than this, other than the timing issues?
I bought a commercial property about 10 years ago, under a partnership rather than a SIPP ( should be similar though). No VAT had to be paid on the completion consideration, as the purchase fell under transfer of going concern. If there are tenants in place this could solve this for you. If not then normal rules on reclaiming input tax would presumably apply and so you may have this short term funding to find.
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