The vendor isn't obliged to charge VAT but would want to charge VAT on the sale. If they sell the building exempt from VAT, they will have to pay back some of the VAT that they deducted when buying the building as an adjustment under the Capital Goods Scheme. They may be amenable to selling without VAT for a higher price to cover the VAT bill that would accrue.If it's an old building that money was not spent on refurbishment, then it doesn't make any sense that they would charge VAT on it. Sounds as if the vendors require specialist VAT advice.
The fact that they say "joint option to tax" suggests that they are not obliged to charge VAT.
If they sell the building exempt from VAT, they will have to pay back some of the VAT that they deducted when buying the building as an adjustment under the Capital Goods Scheme.
It's a receiver sale, don't know if that makes a difference but might explain why they want to charge VAT.
Ah, that probably explains it.
I have been told that, for simplicity, Receivers just charge VAT so that there is no subsequent comeback on them.
If they are charging it incorrectly, you may not be able to reclaim it whatever you do.
So if a building has a market value of €100k normally and they insist on charging VAT, they should reduce the price to
€88k
+13.5% VAT
=€100k
Brendan
I'm now veering away from it as there seems to be a lot of issues that could come back to haunt the purchaser.
I couldn't see why they'd insist on the joint option to tax the sale otherwise. A receiver being involved may change things though.Hi Ciru
I defer to your expertise on the matter, but why are you so sure that they paid VAT on the purchase?
I think it's unlikely as the building "requires substantial refurbishment."
I suppose that they might have bought it new 10 years ago and have since let it go downhill.
Brendan
There’s a commercial building for sale on a main street in a town down the country that requires substantial refurbishment. It has retail units on the ground floor and some living space overhead. The sale is listed as a “joint option to tax” which means the purchaser will have to pay VAT.
What I’m wondering is if I buy the property for a business that I’ll be setting up in the next few months (i.e. company isn’t set up or registered yet):
- can I re-claim the VAT when the company is set up?
- could / should I sell the building to the company when the company is up and running?
- are there any other implications I'd need to be aware of?
Thanks in advance.
If letting to your company, I think company must be 90% involved in VATable supplies, if not I think you can't charge VAT to company, and I think you then lose recovery capacity on VAT you were charged. To facilitate VAT recovery, I think you need to register for VAT personally if you are buying property personally and you hope to recover the VAT. WARNING : TAKE PROFESSIONAL ADVICE, MY COMMENTS ARE WITHOUT PREJUDICEThere’s a commercial building for sale on a main street in a town down the country that requires substantial refurbishment. It has retail units on the ground floor and some living space overhead. The sale is listed as a “joint option to tax” which means the purchaser will have to pay VAT.
What I’m wondering is if I buy the property for a business that I’ll be setting up in the next few months (i.e. company isn’t set up or registered yet):
- can I re-claim the VAT when the company is set up?
- could / should I sell the building to the company when the company is up and running?
- are there any other implications I'd need to be aware of?
Thanks in advance.
If you register for VAT personally, you do so in the context of you making VATable supplies. Renting property to your co. could be VATable supplies if all conditions are met : eg 90% rule above, also execute option to charge VAT on rentsIf letting to your company, I think company must be 90% involved in VATable supplies, if not I think you can't charge VAT to company, and I think you then lose recovery capacity on VAT you were charged. To facilitate VAT recovery, I think you need to register for VAT personally if you are buying property personally and you hope to recover the VAT. WARNING : TAKE PROFESSIONAL ADVICE, MY COMMENTS ARE WITHOUT PREJUDICE
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