This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

pre-option expenses

Nonimous
Posts: 69
Joined: Thu Jul 16, 2009 12:39 pm

pre-option expenses

Postby Nonimous » Thu Mar 14, 2019 5:44 pm

Client owns a pub and has let it to someone else to run a business in

Property was not opted. Client has signed a lease which is silent on whether VAT is due (lots of 'if's) and has had the first quarter of rent

Client has now realised that if they register for VAT and opt to tax then they can recover VAT on future refurbishments. The tenant is VAT registered and does not mind paying VAT as they can recover it.


Client has had an expensive bill for legal fees on this lease

So:


I) Client I think cannot backdate the option to tax as they have already received one rent payment with no VAT

2) IClient should still get automatic permission to opt because they are not letting to a connected party , and once opted there is no intention to make exempt supplies

3) I wonder whether HMRC might allow some of the input tax on the legal fees under 'payback' para 13.9 of VAT notice 706 on the basis that the intention has changed?

Your thoughts are appreciated

les35
Posts: 542
Joined: Wed Aug 06, 2008 3:09 pm

Re: pre-option expenses

Postby les35 » Thu Mar 14, 2019 7:45 pm

You cannot normally back-date an option to tax.
But, is the contract a rent/lease, or a licence to operate a business which will be taxable anyway.
Some paid-for professional advice Is essential on this type of arrangement.


Return to “VAT & Excise Duties”