Land purchase VAT/TOGC

by **jimxxx** on Mon Sep 26, 2011 12:45 pm

Hi,

I'd be very grateful for any advice on the following topic.

I am considering purchasing a small (0.4 acre) plot of land on a local industrial estate. On approximately one third of the land there is a mobile phone telecomms base station, with tower, cabinets, etc at the base, in a fenced off compound. The rest of the land is not developed. The tower compound, etc was built some years ago (more than 10?) by the mobile telecomms company, and they undertake all the maintainance, electricity supply, planning, etc associated with it. The contract produces an annual rental income and has a further 5 years to run.

I could either purchase the land through my own VAT registerd company, or personally. I'd prefer to purchase personally if I can avoind paying VAT.

The vendors, through the estate agent, have told me that the purchase will be subject to VAT because "when they bought it, they paid VAT". Am I correct in assuming that just because they paid VAT, then it doesnt neccessariy follow that I have to pay VAT?

Also, am I correct in assuming that VAT shouldnt be payable, unless the land is opted in for tax by the current owners, not by any previous owners? (I have asked the vendors for a copy of the optin certificate).

I would be interested also to know if the transfer of the land could be considered as a Transfer of Going Concern, and hence not subject to VAT for this reason.

by **Generix** on Mon Sep 26, 2011 1:23 pm

There is but one answer to this sort of question.... "it depends" - this is because it depends on what you want to do with the land etc.

Here are two answers with the assumption that you don't qualify for the conversion/change of use etc exceptions or they simply don't apply.

(1) Assuming no TOGC - then you should only be charged VAT if the seller opted to tax the property. Any property lawyer should know this, any estate agent who deal with commercial properties on a regular basis should know this. Your lawyers should request a copy of the OTT to satisfy themselves VAT is properly chargeable. (as you state you have already done).

(2) If there is rental income and you will take over the rental income, then yes it can be a TOGC....however, note that if the seller has opted to tax then if you want it to remain a TOGC then you must too Opt to tax.

by **section 44** on Mon Sep 26, 2011 2:12 pm

Does the mobile telecoms company have a lease or a licence?

If the latter then what (if anything) is proposed when you acquire the site? Hence would you grant a new licence to the mobile telecoms company?

by **jimxxx** on Mon Sep 26, 2011 2:52 pm

Very mnany thanks Generix and section44 for your quick and helpful responses.

The telecoms tower/compound is on a lease, and I am assuming that I will take it over on purchasing the land, and benefit from the income.

My intentions are the keep the land/tower lease as a longish term investment. In due course, I may either sell that part of the land that is developable (It was granted planning permission about 8 years ago), and retain the part with the tower. Or develop the developale part myself.

by **section 44** on Mon Sep 26, 2011 2:56 pm

If the mobile telecoms company has a lease then you would acquire the land subject to and with the benefit of the lease.

Assuming that the seller has opted to tax the land then provided that the buyer is VAT registered, notifies HMRC of its option and provides an Article 5(2B) anti-avoidance notification to the seller (broadly, that the buyer's option will not be disapplied) then the sale would be capable of being treated as a TOGC.