Vat on Commercial Property

[cmia]

Hello guys,

I am currently looking at purchasing a PUB which has been closed down.

I am alittle confused when I have read futher into the sales listing that VAT would be charged

"VAT at the prevailing rate may be charged on 90% of the purchase price where there is living accommodation. On lock-up premises, VAT will be charged on 100% of the purchase price."

I am not VAT registered and I am wondering what effective ways are their for me not to pay VAT.

THanks

Ideas or Help

[Eamon McNicholas]

Could you clarify if you want a redundant or ex-pub for conversion to residential use or business purposes ?

Eamon Mc Nicholas
Tax Barrister

www.EamonMcNicholas.com

[The above is not to be taken nor used as specific advice]

[cmia]

Hi,

The pub is currently closed,
It has already seprate 3 Bed Flat, which I would like to keep.

The Pub its self, I want to convert into 2 office spaces.

thanks

[Kitty Kat]

To my eye (and please wait for someone to back this up or shoot it down) you would be paying VAT on 90% of the cost as stipulated in the sales listing. This is because there would not be VAT charged on the accomodation, only on the pub.

You would therefore be liable to VAT and, as you are not converting the pub itself into residential or otherwise qualifying property, this would be at the standard rate (now 20%). If you were registered for VAT (which you could do voluntarily) you could reclaim this VAT suffered to the extent that you make VATable supplies via the pub. VATable supplies include:

sales of alcoholic drinks and other standard rated items
supplies of food and drink made in the course of catering
gaming/amusement machine takings, where the proprietor hires (or owns) and operates the machine
income from payphones/vending machines
the provision of overnight accommodation
the provision of rooms for the purpose of a supply of catering (for example for functions)
(taken from CCH)

So if 80% of your income is from the above sources you could (broadly, subject to certain additional rules) reclaim 80% of the VAT you suffered on the purchase.

[Generix]

Hi,

The pub is currently closed,
It has already seprate 3 Bed Flat, which I would like to keep.

The Pub its self, I want to convert into 2 office spaces.

thanks

As the pub is closed you can't even do a dodgy TOGC (for avoidance of doubt dodgy as you have no intention of running a pub).

Therefore you can either suffer the VAT hit on purchase, or you can register for VAT, opt to tax the property and charge VAT on the office lets. The residential flat would be exempt . Any subsequent sale of the office space would also attract VAT. On the upside of VAT registering, you would be able to recover all the VAT on the conversion costs relating to the pub space, any costs relating to the flat would remain irrecoverable.

[Kitty Kat]

Therefore you can either suffer the VAT hit on purchase, or you can register for VAT, opt to tax the property and charge VAT on the office lets. The residential flat would be exempt .

Oh dear God why was I advising about pub sales when he clearly says he is converting it to offices...

[Generix]

Therefore you can either suffer the VAT hit on purchase, or you can register for VAT, opt to tax the property and charge VAT on the office lets. The residential flat would be exempt .

Oh dear God why was I advising about pub sales when he clearly says he is converting it to offices...

You probably did what I usually do...read the first line and then base your answer on that

[section 44]

Any option to tax would be disapplied in respect of the sale of the 3-bed flat with VAT payable only on the price to the extent that it is attributable to the pub that you intend to convert into offices.

[damianellis]

To my eye (and please wait for someone to back this up or shoot it down) you would be paying VAT on 90% of the cost as stipulated in the sales listing. This is because there would not be VAT charged on the accomodation, only on the pub.

You would therefore be liable to VAT and, as you are not converting the pub itself into residential or otherwise qualifying property, this would be at the standard rate (now 20%). If you were registered for VAT (which you could do voluntarily) you could reclaim this VAT suffered to the extent that you make VATable supplies via the pub. VATable supplies include:

sales of alcoholic drinks and other standard rated items
supplies of food and drink made in the course of catering
gaming/amusement machine takings, where the proprietor hires (or owns) and operates the machine
income from payphones/vending machines
the provision of overnight accommodation
the provision of rooms for the purpose of a supply of catering (for example for functions)
(taken from CCH)

So if 80% of your income is from the above sources you could (broadly, subject to certain additional rules) reclaim 80% of the VAT you suffered on the purchase.