flipping and tax matters

Re SPC100
You are correct in the 1st 2 points-the 3rd appears to be the case too-according to Revenue, that is.
The contract make no mention of a VAT invoice. It was agreed that i would get an invoice. In anycase , standard building contracts make no metion of VAT invoices.
 
Yes, that would be ok for me. Its only a difference of 90k or 11k of a rebate. Developer insists they can only issue this to the Original contracted Purchaser.
At this stage i think i need to force it -legally. Developer may be protecting the flippers here-ie they could perhaps be a link-a contractor getting some apts cheap off plan as part payment for works done on site,or at another site. CGT is better than income tax on trading income.
This arrangement suits everyone from the banks financing the project (they see names on contracts) to the contractor who can sell minus the EA's commission and the contractor who gets more this way. Call it a house of cards where each card, top or bottom is relying on all the other cards for their stability.
 
Flipper is obliged to be registered for VAT as he/she is dealing in property. As you are registered for VAT flipper is obliged to provide you with a VAT invoice.
 
Thank you for that HME-you seem pretty sure about that. I also believe the flipper is not just doing this as a private individual, but as a quasi property developer. VAT and income tax issues piling up for the future if audited as to their new found riches!
 
extopia said:
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).
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The way I understand it is that the deal is like a three way system. All parties must be represented on the day. The flipper is paid his share and the builder is paid the rest. The former is paid his deposit plus profit but the builder gets the lions share. The property is still considered to be a new build for stamp duty purposes if the purchaser is an owner/occupier. Therefore, it follows that it is still a new build for the investor.

The way it stands at the moment is that the builder has Luthernau's money but is saying he never sold the property to him........he sold it to the flipper!! I understand what you mean by the comments above and that would hold true if not for the split between flipper and builder. Am I missing something?
 
HME said:
Flipper is obliged to be registered for VAT as he/she is dealing in property. As you are registered for VAT flipper is obliged to provide you with a VAT invoice.
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Just because Luternau is registered for Vat, it doesn't follow that everyone who sells anything to him has to be registered too. It just means that Luternau has to charge VAT when he sells.

Why is the flipper obliged to be registered? I don't know whether he is obliged or not but investors sell property all the time and there is no obligation to be registered. How does Rev. distinguish between, someone who is making a business out of it, and someone who just can't afford to continue with sale, and who has been given an 'out' by the builder?
 
Luternau said:
Yes, that would be ok for me. Its only a difference of 90k or 11k of a rebate. Developer insists they can only issue this to the Original contracted Purchaser.
At this stage i think i need to force it -legally. Developer may be protecting the flippers here-ie they could perhaps be a link-a contractor getting some apts cheap off plan as part payment for works done on site,or at another site. CGT is better than income tax on trading income.
This arrangement suits everyone from the banks financing the project (they see names on contracts) to the contractor who can sell minus the EA's commission and the contractor who gets more this way. Call it a house of cards where each card, top or bottom is relying on all the other cards for their stability.
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When talking to a contractor recently he told me that a number of people working on site, i.e. employed full time by the builder, put down a holding deposit on apartments they think will sell well. The developer doesn't necessarily know that his workers are flipping but they (the workers) have inside knowledge of when the first phase is going to be released. I don't know if he was spoofing or what but he was adamant that the practice is widespread. If I'd read your post before I spoke to him, I would have asked how the VAT situation is handled! :(
 
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
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Who pays this gain? Someone has to. If the flipper disappears are you therefore buying the property at the original price and will you have to pay CGT when you sell on the full gain including the flippers gain.
I realise it is not your responsibility to follow up on the flippers tax affairs.
 
liteweight said:
Why is the flipper obliged to be registered? I don't know whether he is obliged or not but investors sell property all the time and there is no obligation to be registered.

The obligation may fall under the value of the transactions-there is a limit of trade under which you do not need to be registered. If the property is second hand there is no VAt issue.

Quote Lightweight

"How does Rev. distinguish between, someone who is making a business out of it, and someone who just can't afford to continue with sale, and who has been given an 'out' by the builder?"

I would say this would be easily established by the fact that it was a one off. It you are doing this frwquently the hard pressed original purchaser line would hardly convince the revenue. They are sure to say you are trading property.

" If I'd read your post before I spoke to him, I would have asked how the VAT situation is handled! :("

Would love to know how others do this alright.
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extopia said:
I hope you mean 17.35% of your gross amount, or else you're paying too much.
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Yes

asdfg said:
Who pays this gain? Someone has to. If the flipper disappears are you therefore buying the property at the original price and will you have to pay CGT when you sell on the full gain including the flippers gain.
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I am only liable for any gain that I ahve made over and above what I paid, -so with evidence (contracts), that I paid a premium on the original SP, this should suffice for my tax affairs.

My solicitor tells me that there is no way for the Revenue to follow 'Flipping deals' as the flippers name does not appear on the lease. So unless the gain is declared they know nothing. All seems a bit lax-but as we all know, if Revenue were collecting all the taxes that they should be they could afford to know 4-5% of income tax and still come out on top. This was a figure that mentioned some time early this year when referring to the tax lost to the exchequer form the black economy alone.
 
If your solicitor is correct and the Revenue can't follow flipping deals, how will they oblige them to pay VAT unless the flipper can be traced through capital gains tax? It's self assessed but I think most would choose this (20%) over income tax (42%). In fact, from reading this subject so far, I know they opt for capital gains. A lot of flippers only do it once but I'm sure a few have made a business out of it.
 
My solicitor tells me that there is no way for the Revenue to follow 'Flipping deals' as the flippers name does not appear on the lease
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Surely the flippers name appears on the VAT invoice from the builder so it can be traced if revenue are aware of the facts.
 
Revenue can follow the paper trail of an invoice, but remember, not everyone asks for one-as I have, and more importantly, if a developer was accomadating to flippers, a VAT invoice could be issued to the the actual purchaser. Thereby leaving little or no trail of the first transaction.

Its easy to see how some people can make a living out of this-Tax free income ! Personally I would decalre at 20% (CGT) , but as its self assessed, its probable that you could get away with 100% if your name featured no-where.

In this case , I feel that I am within my rights to seek and recieve and invoice in my name, for the full asking price. If that leaves the fliper in a tax muddle with the revenue-that is their problem. When it comes to Flipping, its seller beware!
 
asdfg said:
Surely the flippers name appears on the VAT invoice from the builder so it can be traced if revenue are aware of the facts.
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When we bought our name did not appear on the VAT invoice. We requested a copy with our name. Copy arrived but again no name. We asked again with the same result. Our solicitor said it was of no consequence as the invoice was included in the contract sent by their solicitor and should suffice for Revenue purposes. It did suffice but Revenue asked for full contract just to confirm we were the owners. In Luternau's case he can't get the invoice from anyone.
 
There's far too much speculation going on here about what the Revenue might or might not accept or think about this, that, and the other.

If the VAT refund was part of the business plan, you need to be speaking to an accountant who knows the tax law and knows his or her way around these issues. You're getting nowhere here, and speculating about the flipper's tax compliance doesn't solve your problem .
 
extopia said:
There's far too much speculation going on here about what the Revenue might or might not accept or think about this, that, and the other.

If the VAT refund was part of the business plan, you need to be speaking to an accountant who knows the tax law and knows his or her way around these issues. You're getting nowhere here, and speculating about the flipper's tax compliance doesn't solve your problem .
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The reason for the post in the first place was to get some opinions. As can be seen, there are many,differing opinions-and yes some speculation. Call it a open debate-and that is what this whole site is about.

Part of the problem is that i am getting differing opinions from people that i thought I would know-the revenue, Accountants, solicitors, etc. As to the tax compliance or otherwise of the flipper, i feel justified to wonder about this, as it is this party that is blocking me from sorting out my tax affairs. Perhaps Extopia, you can PM me and recomend someone that help me make some progress?
 
Update-from last post in this thread-Oct 06
After much hassling for invoices I finally got the builder to agree that I was the actual Purchaser of the Property, and duly got invoices, in my name-but only for the builders contract price. The VAT refund was lodged to my account in no time.

Revenue were delighed with the information that I provided them with- and have launched an investigation. They confirmed that the threshold for VAT on property sale is nil. If they find that the flipper went out of his way to create schemes to avoid tax-this guy may face VAT and income tax liabilities plus interst and penalties circa 200k!! Unfortunately, unless he makes a voluntary disclosure I will never know if they were done and for how much! There is no fun in that!!!
 
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Hi Luternau,

I am now in exactly the same situation. How did you go about getting the invoice off the builders?. Did your solicitor help you or did you have to hassle them yourself?
 
Welcome to AAM
Your solicitor should help you. I got it from the builder after a bit of correspondence-really it gets down to what is in the contract you have with the original purchaser. It appears form your post that you are having difficulties?
 
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