VAT on leasehold commercial property I'm selling

by **Pears** on Fri Jan 20, 2012 11:04 am

I am a solicitor and am not ashamed to say I am baffled by some enquiries I have had from the buyer's sol about a commercial property my client is selling. Forgive me but I don't do much commercial stuff and I am very confused. It's an assignment of leasehold property but not a TOGC. The question is:
is the transaction standard rated, exempt, zero rated or outside the scope of VAT? (I hadn't given VAT any thought and the selling agents didn't mention it either. The sale price of £230,000 is the price and that's that.)
Other questions are: Why do you think it is standard rated/ exempt/zero rated?

Have you exercised a valid option to tax?

Has the landlord exercised a valid option to tax?

is it partly within and partly outside the scope of VAT?

Well, how the heck do I know? Can someone please help?

by **Generix** on Fri Jan 20, 2012 11:41 am

Are you VAT registered? If so what is your main business activity?

How old is the building?

Have you ever opted to tax (previously known as opted to waive exemption)?

Did you occupy the building or sublet it (or any part of it)?

When you purchased it did you pay VAT?

by **section 44** on Fri Jan 20, 2012 1:18 pm

If the seller is VAT registered and has VAT-elected the property then standard-rated VAT would be due in respect of the sale. Otherwise, the sale would be exempt.

by **Pears** on Fri Jan 20, 2012 1:25 pm

Generix wrote:Are you VAT registered? If so what is your main business activity?

How old is the building?

Have you ever opted to tax (previously known as opted to waive exemption)?

Did you occupy the building or sublet it (or any part of it)?

When you purchased it did you pay VAT?

Building is probably 19th century. The lease is a restaurant in the ground floor of the building. The lessee is selling her leasehold interest. I don't know if she ever opted to tax. Probably not. She has never sublet. I don't think she paid VAT when she bought it.

by **Pears** on Fri Jan 20, 2012 1:27 pm

section 44 wrote:If the seller is VAT registered and has VAT-elected the property then standard-rated VAT would be due in respect of the sale. Otherwise, the sale would be exempt.

I doubt the seller has VAT-elected the property. So are you saying that she must charge her buyer VAT?

by **Pears** on Fri Jan 20, 2012 1:30 pm

Pears wrote:
section 44 wrote:If the seller is VAT registered and has VAT-elected the property then standard-rated VAT would be due in respect of the sale. Otherwise, the sale would be exempt.

Seller is registered for VAT, I believe. I doubt she has VAT-elected the property. So are you saying that she therefore needn''t charge her buyer VAT?

If she ISN'T registered for VAT then does that mean that she needn't charge her buyer VAT?

by **section 44** on Fri Jan 20, 2012 1:39 pm

Pears wrote:I doubt the seller has VAT-elected the property. So are you saying that she must charge her buyer VAT?

I thought that what I wrote was clear. Does this help:

If (both):

1. the seller is VAT registered; and

2 the seller has VAT-elected the property,

then standard-rated VAT would be due in respect of the sale (hence the seller should charge the buyer VAT).

If either 1 or 2 above is not satisfied then the sale would be exempt (hence the seller should not charge the buyer VAT).

by **Generix** on Fri Jan 20, 2012 1:46 pm

By the way are you sure a TOGC doesn't apply? (i.e. in some cases the purchaser doesn't want it to apply because it means they would otherwise have to VAT register earlier than they would like)

A TOGC is a matter of fact and not optional.