Vat re_ purchase of apartment

[galway_blow_in]

Came across an apartment in oranmore which is going to auction in a few weeks, checking through the legals and the property was originally bought through a registered company until being repossessed earlier this year.

Special condition demands that the purchaser must account for vat as its a transfer of goods sale

Something more common with the sale of a commercial property where being vat registered is usually a pre requisite for any budding bidder, older properties are often vat free if no development took place

Question is, is there a necessity to become vat registered in order to successfully purchase a second hand apartment which was originally bought through a registered company?

I accept that any legacy vat costs for the surrender of a lease etc would have to be carried by the purchaser but would it not be sufficient to simply cover the vat cost burden of the vendor ( receiver) by simply paying extra afterwards?

 

[dublin67]

This sounds like a sale from 2007 or before. Anything since 1 July 2008 relating to residential apartments is exempt from vat and, apart from sales of new residential properties and one other exception, it is not possible to charge vat on their sale. I'm not 100% sure that whoever completed Special Condition 3 is aware of the rules. I would be very surprised if you get a vat registration as there is no vat on second hand properties.

 

[galway_blow_in]

This sounds like a sale from 2007 or before. Anything since 1 July 2008 relating to residential apartments is exempt from vat and, apart from sales of new residential properties and one other exception, it is not possible to charge vat on their sale. I'm not 100% sure that whoever completed Special Condition 3 is aware of the rules. I would be very surprised if you get a vat registration as there is no vat on second hand properties.

The sale is being held by auction in two weeks, first mortgage taken out upon purchase in January 2007.

 

[galway_blow_in]

Transfer of business relief would allow for the avoidance of charging vat on sale though it says the purchaser should be an "accountable person", that means being vat registered as far as I know?

 

[Ravima]

what does your solicitor say?

 

[galway_blow_in]

what does your solicitor say?

Solicitors know nothing about vat

 

[dublin67]

I don't see how vat can arise here. If I was reviewing this I'd strike out the entire Special Condition 3. Any vat on the sale is a matter for the vendor entirely.

 

[galway_blow_in]

I don't see how vat can arise here. If I was reviewing this I'd strike out the entire Special Condition 3. Any vat on the sale is a matter for the vendor entirely.

Hi Dublin , i copied and pasted this from the contract for sale , im beginning to wonder if the vendors solicitor just bunged in this to perhaps cover themselves in some way and it has little if any relevance in practice ?

that said i did read on the Deloitte website that where someone in the property development business bought a residential apartment and subsequently had it repossessed , the property still remains in the vat net in the event of a sale within twenty years after being purchased and with relevant obligations and responsibilities transferring to any new owner , the new purchaser - owner must also continue to keep records as part of the CGS ?

does the text below make it obligatory that the purchaser is vat registered ?, i would not mind paying vat , i would not want to claim it back

3. VAT 3.1 In this Special Condition: “Accountable Person” has the meaning attributed to that term by Section 2(1) of the VAT Act; “Freehold Equivalent Interest” has the meaning attributed to that term under Section 2 and Section 19(2) of the VAT Act; “VAT” means Value Added Tax; and “VAT Act” means Value-Added Tax Consolidation Act 2010 and related VAT regulations. 3.2 (a) The Sale is by way of a transfer of a business. The Purchaser warrants to the Vendor that the Purchaser is an Accountable Person for the purposes of Section 20(2)(c) the VAT Act and the Purchaser has taken or will take all steps necessary to be taken on the Purchaser’s part so that the Sale will qualify for relief from VAT under Section 20(2)(c) of the VAT Act, and that the Sale shall not be a supply of goods for the purposes of the VAT Act. The Purchaser shall indemnify and keep the Vendor indemnified against any loss, cost or liability which arises as a result of such warranty being or becoming untrue or incorrect in any respect due to the act, neglect or default of the Purchaser. (b) Where paragraph 3.2(a) does not apply, the Sale of the property is exempt from VAT under Section 94(2) of the VAT Act.

 

[galway_blow_in]

I don't see how vat can arise here. If I was reviewing this I'd strike out the entire Special Condition 3. Any vat on the sale is a matter for the vendor entirely.

Vendor is probably trying to pawn off the vat history unresolved issues to some hapless purchaser, read an excellent piece by a Miss Barbour from the law society from a year ago on the issue of TOB, it doesn't apply with residential sales but is used by receivers due to the fact that the borrower often doesn't play ball having had their property repossessed and so there is no CGS records, the attempt is to pass the bag to the buyer and let them deal with unfinished vat business.

Whole area is a relative mess, apparently there is a way around it by using the PCVE but that only works with private treaty sales, the PCVE takes the property out of the vat system and the buyer simply pays extra for the property to offset the vendors vat liability

Problem in an auction setting - the power of the auction sale contract can trump any pointing out the erroneous tactic of selling a residential property as a TOB?

Could a buyer end up getting sued despite the flagrant errors of the vendor due to the supposed all powerful veto of the auction sale agreement?