flipping and tax matters

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Luternau

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I am trying to get a refund of VAT on new property bought for investment. Does anyone know how to go about getting an invoice in my name for the full amount of the purchase price paid for property bought through a sub sale. Flipper says they have no liability to supply one, yet the builder says I am not the person they had the contract with.
Either way they could only supply an invoice for the original sales price which result in my submitting an invoice for a lower sales price.
Surely there is some precedent for this. The properties were new when I go them so VAT should be chargeable on the premium sales price.
Sounds dodgy -from a tax avoidance perspective(legal or otherwise)
 
This is an interesting one!! If the flipper is not registered for vat, then s/he cannot supply you with a vat invoice. If the contract with the builder is not in your name, then he can't supply you with one either. Even if it was possible for the builder to supply the invoice, it couldn't be for the amount you paid because some of that payment went to a third party, i.e. the flipper! Have you spoken to your solicitor?
 
You have nailed the issue there in one-its a dilema or classic catch 22.
I have spoken to my solicitor and I seem to know more that he does.
According to the Revenue VAT section in Dublin Castle-(the specific expert on it), VAT is due on an assignors (flippers) markup, whether or not they are registered for VAT. This occurs as the goods (property) is sold new and therefore liable for VAT at the full price even if it ges through an intemediary. Seller does not agree and says they are exempt.
As it stands i am in limbo with my vat refund claim.
You have insight on this?
 
I have reclaimed VAT myself but I've no insight into your particular situation. Our solicitor hadn't a clue either, and it wasn't something our usual accountant specialised in. We ended up doing our own research. I have to say the staff at the VAT office were extremely helpful.

The only thing I can say is that, presumably the builder's invoice will be included in the paperwork for the sale. This might be a reduced VAT amount but, as the VAT has to be paid back eventually, some might be better than none....if you know what I mean.

I presume the VAT office meant that VAT was included in the flipper's markup.....so maybe you can take that aspect into account also.
 
I would have thought that the Flipper would be considered as carring on a trade (buying & selling houses) and would be obliged to register for VAT as the value of the house would be over the vat threshold which requires you to register. The flipper would also be liable to Income Tax and not CGT from his profits.
If I was the flipper I would pull the sale and look for someone who does not require a vat invoice and treat this transaction like everyone else (ie. keep the head down and hope the revenue don't come looking!!!!!!!!).
 
Thanks for the replies,

Sale has gone through. Bulider refuses to give me invioce in my name for the original sale price, citing that they had no contract with me. A but inflexible, as VAT is already paid, so is should not matter to them who's name is on the invoice.

I agree that this should be treated as trading income as the and it is above the threshold which is exempt from registration for VAT. Flippers beware that its not all plain sailing into the sunset with massive profits! Perhaps its best to close sale, pay stamp duty and sell. Profit subject to CGT at 20%, which is better that a VAT due bill and income Tax at 42% plus penalties if investigated.

Anyone got anymore ideas on how to proceed?
 
Luternau said:
Thanks for the replies,

Sale has gone through. Bulider refuses to give me invioce in my name for the original sale price, citing that they had no contract with me. A bit inflexible, as VAT is already paid, so is should not matter to them who's name is on the invoice.
Click to expand...

On the contrary this matters a great deal to the builder. If a third party (ie, you) uses an invoice in order to secure a VAT repayment, and the invoice turns out to be fraudulent (ie, representing a transaction that never actually took place), then there would be serious implications for the builder. The www.odce.ie website lists the details of at least one case where a building company were prosecuted for failure to maintain proper books of account after being caught up in a high-profile scam involving VAT reclaims and misleading invoices.
 
The VAT was paid by the builder so there is no worries on this front. Its getting an invoice in my name for the price that I paid that is the problem
I know that the Revenue will not refund me VAT on the full sales price, without knowing if VAT has been paid on the full sales price. If VAT is chargeable on the Assignors markup, surely the assignor should be registered for VAT as the amounts here exceed the exemption threshold.

Regarding SPC100 request;

The original purchser agreed to surrender his rights and interest in the property for a fee (assignors mark up). Does this mean that they are selling contracts or property? If it is a contract would the contract be regarded as exempt from VAT or would it be regarded as goods? The agreement also said that I would pay 'such VAT to the assignor that may become due'. This is a strange clause as the parties that rule on such matters -the revenue-were not aware of the agreement. Remember Revenure have said that VAT is due on an assignors mark up-and that is about the sum of their assistace in this to date,

It seems to me an attempt by the assignor to avoid charging VAT. Surely all Vatable goods should have VAT included in the price payable to the vendor? Unless exempted of course. How many purchasers are going to self declare a liability to pay a few thousand in VAT?
 
It's a confusing subject. It all comes down to who you bought the property from I suppose. In the case of flipping, the property seems to remain somewhere in the ether!! I agree with Ubiquitous, the builder cannot provide a VAT invoice if you did not buy the property from him. I suspect that most flippers sell to people who do not wish to reclaim VAT.

When the flipper paid a deposit, this would have been VAT inclusive but s/he probably does not reclaim it if they are not registered.
 
Yes its a confusing one alright and I am in the middle of it!

As far as I am concerned I bought from the flipper- who advertised the property for sale-not the contract, and duly entered into a contract to sell. I was happy to purchse at the price offered,they made their profit-fair play to them them.

Whether they are registered or not for VAT is not my concern. They seem very quick to refer me to the builder when, as has been pointed out by posters, and I am aware of myself, I had no contract with. The builder has supplied an invoice in the name of the the original purchaser-which is of no use to me when dealing with the revenue!

Anybody know any good accountants that specialise in VAT and wont bill me to heavily? May need to change my solicitor too as he has been of no help.

In the wise words of the greatest philosopher of modern times-Bart Simpson ! "you are damned if you do and damned if you dont"

Maybe I will wake up soon and smell the ether!
 
I think it does make a difference whether someone is registered or not. Property sales/rentals are not usually subject to VAT unless it's a new build or the owner has waived their right to exemption. At the moment, for example, if I sold you an apartment, the price would be VAT inclusive and I would have to pay that over to Rev. That was our choice but as far as property in general is concerned VAT does not have to be charged unless the owner has waived his exemption AFAIK.
 
Think that VAT is chargeable on all new property. New property being described as property that has not previoulsy been registered in the state with the land registry.
On this basis -the property I purchased qualifies. As the flipper did not pay stamp duty. If the flipper had of close the sale and paid stamp duty, then the property would not be new, and could be sold on, without liability to VAT. That though would have reduced the profit of the flipper-which they did not want to do. May I add that this was done on a wholesale with many units (x10's) being sold this way.
If you think about it like this-flipper buys off plan in phase one for say 100k in 2005, Developer puts phase one market in 2006 and is sells out all identical units for say 125k (which includes VAT at 13.5%) Non VAT registered Flipper later agrees to sell to me (before completion) for 125k(or more)-Both properties are identical, both ready at the same time, but one has a higher proportion of VAT -just because the developer sold it. It does not make any sense that such a high priced object could be exempted just because its more profitable not to be VAT registered.

AFAIK there is case history of the revenue persuing people who have used revenue laws as a means of tax avoidance-which they in certain instances determine to be tax evasion.
 
Curiouser and curiouser....Luternau, I presume you're registered for VAT already because if not, all of this is moot really.

When an owner/occupier buys from a flipper they don't have stamp duty liability (under 125 sq.mt.) as the property is deemed new. Presumably it's the same for anyone buying from a flipper?? You may still have a case with regard to getting a VAT invoice out of the builder. He did not sell the property to the flipper, but sold an interest in it. The larger portion of the property still belonged to the builder and you bought the flipper's interest plus the builders share.
 
This thread is too bizarre. Sounds like the VAT reclaim idea may have been an afterthought?
 
Yes I am registered for VAT. For the record, I did not purchase 10's-that is the number of properties flipped. Not to be sneezed at. If I were the revenue my nose would definately be getting sniffly...
SPC100 is probably not far off the truth when saying that the builder could give me an invoice in my name as the person that bought its majority interest in the premises. IUnfortunately they do not see it this way-and keep saying that we had no agreement. They are technically wrong in issuing an invoice in the name of the flipper-who actually bought nothing.

At this stage I think that UI have to get professional advice -and based on that take appropriate action. What is the policy of recomendations on this site? Probably have to declare your interest and why you recomend them?

By the way because of all this messing I have hade to make an incomplete return for the period in question. Rev insist on paper filing for large rebates-and I dont have the paper!

This is a real head wrecker for me, that said it beats the lengthy thread about house prices falling...
 
extopiaThis thread is too bizarre. Sounds like the VAT reclaim idea may have been an afterthought?

Not at all, I told the seller from the outset that I was registered for VAT , and would be seeking to capitalise them. I explained the process and said that I would require an invoice for the full amount paid in my name.
Obviously they did not fully understand or probably more to the point they were jsut trying to off load the properties to aviod closing on them themselves...
Perhaps in such cases its seller beware...if they did not understand the implications of what they are at, then perhaps they would be better off not getting involved in massive speculation-as that is what it is. We are talking about the total conveyance of property totalling about 9 million Euro to a multitude of buyers-some of whom may not even be aware that there may be a future liabiity to unpaid VAT-assuming that what SPC100 said at 2.40 pm today;
"They might think this clause limits there liability in the future . i.e. if they get investigated, and get told they should have charged VAT, they will add the VAT on to your bill and say it is now due and bill it to you"
 
I'd say it's buyer beware, as it looks like in this case you will have difficulty reclaiming the VAT, so if that was a factor in your purchase you're out a significant amount?

It seems to me that if there's any liability in this case for unpaid VAT it won't be on you - it'll be on the people who collected VAT. As you did not receive a VAT invoice (and the "flipper" does not appear to be VAT registered), you did not pay any VAT so you have no liability to the VAT office, nor a case for a refund.
 
Of course he paid vat, it's included in the price of the sale on a new build. A FTB pays vat on a new build but normally has no way of reclaiming it. The builder then pays this on to Rev.

Luternau, do you have more than one property. As far as I know, you will have to charge vat on the rental even though you couldn't reclaim. Waiving exemption means that all properties owned by you are liable for vat.

In your case, the builder is going to repay vat on the property to Rev. If his books were examined, who would he say paid him the vat....the flipper or you??
 
liteweight said:
Of course he paid vat
Click to expand...

As I understand this thread, if his deal was with the "flipper" and the flipper is not VAT registered, he did not pay VAT as such as the seller cannot charge VAT, he just paid the VAT-inclusive-equivalent amount (plus whatever extra he paid).
 
I have more than one property, have waived my exemption, and now return 21% of all my rental income bi monthly. Its the most tax efficient way for me as my LTV is quite low and I dont want to gear up by buying more to make the rental income more tax efficient.
Only the mark up was paid directly to the flipper. The rest was paid to the developer. The contract was clear that the flipper was to be paid his mark up on the same day the conveyance took place. In essence I took over the flippers responibilities to the developer. That is what i signed up to.
Such is the nature of these deals that they remain invisible to the revenue-the flipper just dissapears, and in some cases can even dissapear without even declaring the gain. Perhaps its just me, but does anybody else think that this flipping (in this case -selling on before completion) is not just as clear cut as the flipper would like to think.
Revs comments to me-the property is still regarded as new, even when flipped to me in this manner, and VAT is due on a flippers markup. Thats their interpretation...and i would like to think that the experts know tax laws.
 
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