VAT - commercial property

[PurpleMoonlight]

A pension scheme is to acquire a 30% interest in a commercial property that is subject to VAT.

I intend to register the pension scheme for VAT and effect an Option to Tax on the property. It will then be purchased as a going concern as it is subject to an ongoing lease. The pension scheme will then invoice the tenant separately to the 70% owner for it's share of the rent.

Is this okay? Can more than one entity have an Option to Tax on the same property?

I've done joint outright purchases before and then applied for a joint VAT registration and Option to Tax, but not done a part purchase where the current owner retains an interest before.

[Eric Mc]

What does your accountant say?

[PurpleMoonlight]

The pension scheme doesn't have one.

The vendor may have one, it's personally owned not corporately.

[Eric Mc]

And, what does the accountant say?

[PurpleMoonlight]

What's with the silly games?

I thought we helped each other out here ....

[Eric Mc]

Your question actually relates to a fairly specialised and complex area of VAT. I was just wondering what professional advice you had already sought on the matter.

[PurpleMoonlight]

None.

Had I known the answer I wouldn't have posted the question.

[Eric Mc]

Some people post for a second or third opinion - which isn't always a bad idea.

As I said, the area you are asking about (VAT on property) coupled with pension rules makes it quite a complex area and you may need very specialised advice - certainly not the type likely to be given away free on a general internet forum like this.

[Jockman]

Apologies...despite being done in 2 x 50% tranches, my SIPP property purchase was never liable to vat as the property was never elected for vat.

Can't you 'un-elect' it

[Billsnemesis]

One point that is not made clear is how the 30:70 split is going to operate. Unless you literally buy 30% of the land then legally the ownership will be joint so the invoice will come from both landlords and only be split once payment is made.

If the landlord's interest is divided by splitting up the property there can be nightmares dealing with tenants and rental income and we would always advise against it. It is called a split reversion and is to be avoided.

If you PM me I am happy to look it over to see how the property side works and that may assist in dealing with the pension involvement.

[srebbe64]

Off topic I know, but some years ago I purchased a commercial property (1000 year lease) and it was subject to VAT - which I didn't mind because I'm VAT registered so I could claim it back. However, what shocked me was that the Stamp Duty was calculated on the price + the VAT (Tax on Tax in its purest form)!

[Jockman]

Remember there is stamp duty on the lease itself if it is over a certain value.

[PurpleMoonlight]

All the parties to this are connected.

The only issue is whether each part owner maintains their own VAT registration and Option to Tax or we have to apply for a new joint VAT registration and Option to Tax.

[Digga]

I don't know the technicalities of registering a pension scheme for VAT, but if it can be done then there is no reason why more than on entity cannot share the VAT liability. It is no more different than to businesses - each would have a liability proportional to their share and would also be able to claim it back in their VAT return.

[PurpleMoonlight]

Yes a pension scheme can register for VAT, I have several that are already.