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Where Taxpayers and Advisers Meet

VAT on purchase of land by buyer without commercial intentions

eal
Posts:2
Joined:Thu Mar 23, 2017 11:05 am
VAT on purchase of land by buyer without commercial intentions

Postby eal » Thu Mar 23, 2017 11:17 am

hello
Is VAT payable by buyer in the following instance where
- seller opted to tax land
- land has attached timber
- seller had small forestry business
- buyer does not have intention of using the land for commercial purposes
- buyer is not VAT registered
- buyer intends to use land for personal/private use and to replant felled areas
- buyer may sell some timber as an incidental to clearing and replanting parts of the land in connection with land and timber management
I have read the various VAT notices, but the answer is unclear to me. In addition to Notice 742A, VAT 1614, Notice 700/9, what other documentation should I read.
Thank you in advance for any and all advice!

spidersong
Posts:352
Joined:Wed Aug 06, 2008 4:05 pm

Re: VAT on purchase of land by buyer without commercial intentions

Postby spidersong » Thu Mar 23, 2017 3:53 pm

You would really be looking at Schedule 10 of the VAT Act or a published VAT guide book dealing with Land and Property if you wanted to see some publications. However to save you the trouble:
Generally land is exempt from VAT, however once the Option to Tax has been taken then all supplies of the land (lease, freehold, licence) become taxable, unless an exclusion applies.

Exclusions from the Option include:
Land where the purchaser intends to build a dwelling, or where existing dwellings that will be used as such exist, land for charitable non-business use, supplies between connected entities to counter tax avoidance, sales to Registered Social Landlords to provide housing.
The Option can be revoked after 20 years, so if the seller's had the land a long time then this may be a possibility.

But other than those any sale of the land will carry VAT, which will not be recoverable by the purchaser unless they plan to use the land for the purposes of a taxable business that they carry out.

So in the circumstances you describe then the purchaser will incur VAT and be stuck with it. You may want a specialist to look at it and see if there's anything in the paperwork or way they can restructure to mitigate the VAT. Also you may want to check on that option as normally a forestry business wouldn't have needed to opt in order to recover its VAT, timber rights and the sale of timber being taxable activities without an option being in place. So I'm afraid to gain any further insight you'd probably need someone going through the papers rather than the sort of general advice you could get on a forum.

eal
Posts:2
Joined:Thu Mar 23, 2017 11:05 am

Re: VAT on purchase of land by buyer without commercial intentions

Postby eal » Thu Mar 23, 2017 4:06 pm

That's very helpful spider song and it resonates with me logically. Thank you.


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