Reclaiming VAT on commercial property purchase

[lickthespoon]

I am considering buying a commercial property that the vendor has opted in for VAT. The price is circa 60,000+VAT.

The property is ultimately intended to be used for our business (private Ltd) which is currently not VAT registered.

There are a number of ways to fund the purchase.
- I personally buy the property and lease it to the limited company (I am not VAT registered)
- I buy the property as part of a SIPP in my name and lease it to the company
- I make a loan to our Limited company and the company buys it.

Is there any way of claiming back the VAT other than our limited company becoming VAT registered?

Presumably the seller has to include the VAT as he has opted in?

Thanks

[3pic]

VAT can only be reclaimed by a VAT registered entity making taxable supplies.

The seller, having opted to tax, is obliged (for 20 years from point of opting) to sell the property on with VAT.

If the property is currently leased to a tenant, then you could structure the sale to be a transfer of a going concern maybe, but if the property is just occupied by the current owner, then that will not be the case.

The SIPP could buy the property and lease it back to the business, but the SIPP would have to register for VAT and opt to tax the property (with the same 20 year rule) meaning it would charge VAT on the rent to the business - and as that is unregistered it'll be incurring an irrecoverble VAT.

Even if you buy pesonally, you'd still have to register for VAT and opt to tax the property and charge VAT on the rent.

[lickthespoon]

Ok thanks,

it sounds like in this instance we would better absorbing the VAT and keeping the property unregistered to avoid paying VAT until absolutely necessary.

[deebee]

The only other thing to bear in mind is that, if your company becomes VAT registered, you can reclaim the VAT on the property up to a period of three years prior to the registration date. If you wait three years and one day after you buy it, you will have lost the £10k. That's the position with buying it in the company. If you buy it outside the company and let it exempt for a period of time, you won't be able to reclaim the full £10k.