VAT reclaim on a new commercial property

[derektrimblitz]

I'm looking for information on VAT reclaim on a new commercial property.

the situation is -

New commercial property nearing physical completion.
Vendor will sell the freehold of the land and the new industrial unit to the purchaser.

I believe that as it is new it will attract VAT on the sale. It looks like any commercial property less than 3 years old automatically attracts VAT. This is regardless of whether there is an 'option to tax' in place.

VAT should be reclaimed by the purchaser. As long as -

the purchaser takes immediate occupation
and/or
A building completion certificate has been issued

Would some wise VAT type person know of any pitfalls where VAT paid on the purchase could not be reclaimable by the purchaser?


also, quite annoying that SDLT is calculated on the price AND the VAT..

thank you

[Panamax]

What are you going to do with it after you've bought it?

If you recover the VAT paid on purchase you'll have charge VAT on top of the rent if you rent it out. You can't just chop and change a property in and out of the VAT regime at will. Consistency is required.

[derektrimblitz]

It’ll be used by the company that will own it. It won’t be rented out.
The purchasing company will carry out VAT qualifying business from the premises.

[ReformedPistonhead]

It does suck that you pay Stamp Duty Land TAX on the Value Added TAX.

I had quite a hissy fit when I found that out.

Reclaimed the VAT on the purchase price through the VAT registered company that I bought it with.

Now I charge VAT on top of the rent.

It was a new company and its first VAT return which was obviously a massive reclaim so I also got an inspection for my troubles for the first 6 months. Had to show all receipts etc etc.

All legitimate of course but quite a stress and faff.

[anonymous-user]

TOGC is how it’s usually done. Check with your accountant/solicitor

[Rufus Stone]

AnotherUsername said:

TOGC is how it’s usually done. Check with your accountant/solicitor

Only if both buyer and seller are renting out the property.

OP, I believe you will need to register an Option to Tax on the property, then you will be able to reclaim the purchase VAT on your subsequent quarterly VAT return. Keep the emailed acknowledgement from HMRC safely, that's all they issue now - no formal confirmation letter.

Edited by Rufus Stone on Sunday 14th January 15:59

[derektrimblitz]

ReformedPistonhead said:

It does suck that you pay Stamp Duty Land TAX on the Value Added TAX.

I had quite a hissy fit when I found that out.

Reclaimed the VAT on the purchase price through the VAT registered company that I bought it with.

Now I charge VAT on top of the rent.

It was a new company and its first VAT return which was obviously a massive reclaim so I also got an inspection for my troubles for the first 6 months. Had to show all receipts etc etc.

All legitimate of course but quite a stress and faff.

Good info, thank you.

I fairly expect a VAT inspection with the reclaim.

[LeighW]

Rufus Stone said:

Only if both buyer and seller are renting out the property.

OP, I believe you will need to register an Option to Tax on the property, then you will be able to reclaim the purchase VAT on your subsequent quarterly VAT return. Keep the emailed acknowledgement from HMRC safely, that's all they issue now - no formal confirmation letter.

Edited by Rufus Stone on Sunday 14th January 15:59

If you're running a fully vatable business from the new premises, you don't have to register an option to tax in order to reclaim the VAT on the purchase. The premises, because they are new are vatable by default, and after three years will revert to their default VAT exempt status. You only need to opt for tax if the premises are being let out and you wish to reclaim the VAT on purchase.

[Rufus Stone]

LeighW said:

If you're running a fully vatable business from the new premises, you don't have to register an option to tax in order to reclaim the VAT on the purchase. The premises, because they are new are vatable by default, and after three years will revert to their default VAT exempt status. You only need to opt for tax if the premises are being let out and you wish to reclaim the VAT on purchase.

Okay, ta.