Land and property transactions often present a complex and expensive problem for taxpayers. Property transactions frequently have tight deadlines and often abort because of issues that are not resolved before a deadline. Don’t let VAT be one of these issues. Experience demonstrates that VAT is regularly not considered “up front” in negotiations and for this reason alone it can be a deal- breaker. We have considerable experience in dealing with expenditure on property by entities which are unable to recover all of their VAT eg; doctors’ surgeries, dental and other healthcare practices, sports clubs, academies and other schools, financial, insurance, and other partially exempt businesses etc. Some bodies have specific VAT rules like; charities, housing associations and relevant residential use entities. We are able to assist in these more specialised areas too. In our view, there are four major reasons that VAT needs careful consideration in property transactions:
- Both land law and VAT law are complex. Such complexity means that regrettably, it is not difficult to get things wrong or miss things.
- The amounts involved in property transactions are significant, and getting it wrong becomes a very costly business.
- Property transactions are usually one-off in nature and outside the normal commercial activities of a business. Unfamiliarity increases exposure.
- Legal firms handling property transactions are not VAT specialists and only the very largest practice have any form of VAT specialism. Solicitors very often take advice from advisers like us on VAT matters.
There is one more twist – this is one area where the taxpayer actually has a choice of whether to treat a supply as subject to VAT. Given a choice, it is not unusual for a person to make the wrong one!
What does “Land & Property” mean? Any of the following activities have VAT implications. It is strongly recommended that VAT advice is sought if you are involved in any of the following transactions:
- Building any residential and/or commercial properties
- Letting any property
- Developing any property
- Moving business premises
- Altering a residential property
- Extending any property
- Converting a property from commercial into residential use or vice versa
- Selling any property
- Buying any property
- Demolishing
- Hiring equipment or staff for building work
- Assigning property
- Refurbishing
- Transferring any property
- Purchasing own leased premises
- Opting to tax a commercial property
- Buying a commercial property with the intention to convert to residential use
- Sale and leaseback
- Holiday lets
- Purchase or lease of property for charitable or relevant residential use
- Change of use of a property
- Domestic Reverse Charge (Self-Supply)
What Marcus Ward Consultancy can do for you:
- We can deal with ad-hoc property issues
- Provide VAT planning
- Guide you through the entire process regarding VAT
- Provide comfort to your business/PI insurers
- Review a taxpayer’s structure/policy for holding property – is it VAT efficient?
- Advise on alternative ways to deal with any issues
- Negotiate with the “other party” and/or with HMRC
- Obtain non-statutory clearances when there is doubt over a VAT matter
- Deal with Capital Goods Scheme (CGS) issues
- Provide VAT analysis of transactions
- Assist with decisions regarding the option to tax
- Deal with Transfer Of a Going Concern (TOGC) questions
- Provide second opinions, especially when a party is conflicted out
- Use VAT as a commercial bargaining tool on your behalf
- Review contracts
- Deal with contentious technical matters
- Provide assistance with information in respect of funding
- Challenge any unhelpful rulings from HMRC
- Consider the impact of property matters on the rest of a business
- Maximise input tax claims as far as possible
- Avoid output tax becoming a cost to a business wherever possible.
A general overview of VAT – Land and Property