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Buying a commercial building
Newsletter issue - October 2021
When buying a commercial building, the price may include VAT if the vendor has opted to tax the property. If the buyer is VAT registered and will be using the building wholly for the purposes of the trade it will be able to reclaim this input tax. However, this can mean that a large amount of money needs to be lodged with HMRC temporarily, which can affect working capital in the short term. In addition, the claim for input tax could be restricted if the business is partially exempt.
As a minimum, the buyer needs to obtain a copy of the letter HMRC will have sent the vendor confirming the option was valid. If it transpires that the vendor should not have charged VAT, the input tax claim will be refused. Obtaining a copy of the letter if the original has been misplaced can take time, and lead to delays in completing the purchase. But it may be possible to sidestep the problem altogether.
Revoking the option
It would be worth asking the vendor when the option was made, as it can be revoked if more than 20 years has elapsed. To do this, the vendor would need to complete Form 1614J and submit it before the date the sale price becomes legally binding. On the face of it this is straightforward, but the vendor may be reluctant if there is a knock-on effect on their own VAT returns, but it is certainly worth the buyer asking the question.
As a bonus, the buyer may also save some SDLT - which is charged on the VAT inclusive price.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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