VAT on selling commercial property

by **rehanna121** on Wed Aug 25, 2010 12:25 pm

Ok so I admit I know next to nothing about VAT!

Would appreciate some easy to understand advice -we have recently bought a property(ex school building) and are renovating to use as for hire meeting rooms/offices, we did not pay VAT at purchase, we are considering regisering for VAT to reclaim some of renovation costs however have been advised that if we do this would have to chareg VAT to any potential buyers if the business didn't work out and we have to sell the place. is this true (obviosuly limits who would want to buy ), are there any time limts that you can "deregister" if the business doesn't kick off. Are there any exemptions? The building was only empty for 1-2 yrs before we bought it.

Many thanks for any advice

by **Generix** on Wed Aug 25, 2010 12:41 pm

rehanna121 wrote:Ok so I admit I know next to nothing about VAT!

Would appreciate some easy to understand advice -we have recently bought a property(ex school building) and are renovating to use as for hire meeting rooms/offices, we did not pay VAT at purchase, we are considering regisering for VAT to reclaim some of renovation costs however have been advised that if we do this would have to chareg VAT to any potential buyers if the business didn't work out and we have to sell the place. is this true (obviosuly limits who would want to buy ), are there any time limts that you can "deregister" if the business doesn't kick off. Are there any exemptions? The building was only empty for 1-2 yrs before we bought it.

Many thanks for any advice

Are you going to rent the property itself for someone else to use as a 'meeting room/conference' business?

On the option to tax point, what you've been told is generally correct. If you opt to tax you have 90 days to cancel your option before it is permanent for 25 (I think? please check) years. Can't remember if you need some sort of valid/elligible reason for cancelling the option within the cool-off period.

In any event if you VAT register, opt, don't exercise cancellation within cool-off period then you would have an amount of VAT to pack back on a 'self-supply' of assets on deregistration.

If I were you and your target market are businesses I would opt (if VAT on rennovation/conversion was material).

by **rehanna121** on Wed Aug 25, 2010 1:02 pm

yes rooms will be available to hire for any other businesses to use for meetings/training events etc

by **Generix** on Wed Aug 25, 2010 1:29 pm

rehanna121 wrote:yes rooms will be available to hire for any other businesses to use for meetings/training events etc

Assuming that'd be the only income then you have two options;

(1) Opt to tax which means full recovery of VAT on costs, but having to charge VAT on rent and future sale.

(2) Don't opt to tax, no recovery of VAT on costs, but no VAT on rent and future sale.