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VAT charge on Pub sale by Brewery - buyer to convert to Res

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Joined: Tue Sep 04, 2012 7:39 pm

VAT charge on Pub sale by Brewery - buyer to convert to Res

Postby chillax99 » Tue Sep 04, 2012 7:57 pm

Hello all,

- I am looking at buying a freehold pub for the purpose of converting to Residential flats. I could poss show a pre-application notice of this intention
- it is being sold by a brewery
- currently closed, boarded up for last 6mths...so not a going concern
- price + VAT will be charged eg. £250k + VAT of £50k
- currently the pub has many rooms upstairs (incl some en suite) that had been let out on a per night basis (so not currently residential nor self contained)
- I am a private individual not VAT registered...finance will be mix of cash/commercial loans

Q1. how to avoid the VAT in the first place - getting them to sign and agree a 1614D before price agreement ?
Q2. should the VAT be reduced to 90% at least - or would the fact the upstairs rooms were let out nightly declassify them from being residential ?
Q3 why would the brewery opt to tax in the first place...what would incentivise them to to sign 1614D above...would they lose out somehow on claiming back VAT on their expenses, if so what sort of expenses...(this to gauge is it worthwhile paying a premium to avoid the VAT) ?
Q4. would qualifying conversion costs be VAT reduced i.e 5% instead of 20%...would these costs apply to the whole building ?

thank you very much in anticipation of any answers/thoughts

Posts: 446
Joined: Wed Aug 06, 2008 3:09 pm

Re: VAT charge on Pub sale by Brewery - buyer to convert to Res

Postby les35 » Fri Oct 12, 2012 11:09 am

To my knowledge all major pub operators opt to tax their whole estate. They have a special agreement with HMRC as to how input tax is treated.
You have to try to have the option disapplied, since you are converting to residential. Legally, they cannot refuse a disapplication certificate. However, in practice, you may find they will either try to refuse to accept it, or to increase the price to compensate them for lost input tax.
I think the fact that the upstairs units were for overnight b&b would prevent them being residential use. This helps with your use of the 5% rate for conversion works, You will need to advise the contractor(s) that the work is eligible for the 5% rate.
I do think you need to engage a specialist to work through these issues with you; this will include checking of contracts, plans, etc., which cannot be done on a forum.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: VAT charge on Pub sale by Brewery - buyer to convert to Res

Postby section 44 » Sun Oct 28, 2012 11:56 am

les35 wrote:Legally, they cannot refuse a disapplication certificate.

Irrelevant since the seller is not compelled to sell to you.

les35 wrote:lost input tax

This may be negligible, particularly if the property is outside the capital goods scheme adjustment period.

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