Voluntary Surrender of Investment Property with VAT

[Dan]

We have a residential investment property since 2006 which we reclaimed the VAT on as part of the Waiver of VAT on residential property. VAT was then deemed included in the rent which we have been returning ever since.

Now, long story cut short, we are in arrears with the mortgage, the financial institution deems it unsustainable, and we agree. They want us to Voluntary Surrender the house, they will sell it and we will be responsible for the shortfall.

My question is - who will be liable to repay the VAT balance - will we be left with the VAT liability or will the bank be required to pay it from the sale proceeds. I know that if we were to sell the house we would be obliged to return the VAT from the proceeds but it is the bank that will be in control.

Any advice will be appreciated.

 

[Joe_90]

I'd imagine on the basis that you are surrendering possession rather than title to the bank you will be liable for the VAT on the sale to the new purchaser.

As to whether they will allow the VAT element to be remitted to the Revenue or not is a separate question. If they do the shortfall that you owe them is greater so it adds up to the same amount in the end. I've seen cases where the bank have made allowance for the customer to pay the Revenue from the proceeds of sale. But every case is different.

Have you flagged the VAT liability to them, how much is it. Original cost @ 13.5% less rents collected at 23%. Should you consider cancelling the waiver or having an exempt supply after 9 years?

 

[Dan]

The remaining VAT liability is approx. €20K. If I cancel the waiver does that make me immediately liable to repay the VAT? I don't understand the "exempt supply after 9 years"? I have made the bank aware of the VAT issue but they don't seem too interested. They are just pushing hard for me to give the house back "voluntarily".