VAT position on Commercial Property Gift

[gingerbread]

Could anyone help me with this issue?

I have a commercial property that I would like to gift to my Son.

I realise that the Revenue position would be that the gift is considered a transfer at the open market value and any capital gain calculated accordingly.

However, I have elected to charge VAT on this property and I don’t know how this will be treated. Presumably, if the sale value is nil, no VAT would be payable on the transfer but would my Son then be required to register for VAT and charge this on all future rental income – since my understanding is that the election to charge VAT on any property then lives with the property forever?

Also, would any stamp Duty (or Land Tax) be payable on the transfer.

Any help greatly appreciated.

[Instinctive]

I assume that the commercial property is let to a third party.

Regarding CGT, you may be able to claim business asset taper relief for all or part of the period if the property is used as a trade by the tenant. Previously only private limited company tenants were eligible but have changed recently to allow non-incorporated tenants as well. Also consider CGT holdover relief, if applicable.

I have not researched the answers to your VAT query. However, I assume that you will be accountable to VAT Output tax on the market value of the property, just in the same way as the CGT charge. Your son then has to decide if he wants to recover the VAT charged as his input tax. To do this, he has to register for VAT and make an election to waive his exemption in respect of this property. he will then be eligible to recover the VAT incurred. He will of course need to account for VAT on rents charged to the tenant and also to charge VAT on future disposal, just as you are doing now.

However, if there is continuity of the tenant, you may be required to invoke the 'Transfer of a business as a going concern' rules. This will mean that you will not be able to charge any VAT output tax on the sale and your son does not need to pay it. He will be saved the timing cost of having to pay the VAT and to then claim it back a few months later. Your son will still be required to register for VAT and make the election to waive exemption.

Finally, election to charge VAT lives with the property only so long the next person wishes to continue with it to enable him to reclaim the VAT charged on the purchase price.

RP

[gingerbread]

This is pretty much as I expected.

I very much appreciate your help on this - thankyou.