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Where Taxpayers and Advisers Meet

VAT on purchase/sale of agricultural land

k2017
Posts:1
Joined:Tue Mar 21, 2017 8:45 am
VAT on purchase/sale of agricultural land

Postby k2017 » Tue Mar 21, 2017 8:58 am

Hi,

My wife and I are buying 10 acres of agricultural land, which the seller is charging VAT on.

We therefore plan to buy it through our Limited company, which is VAT registered, in order to reclaim the 20% tax.

My questions are:
  1. If we received planning permission for a residential dwelling on the land, would we have to sell that part of the land back to ourselves as individuals, or be forced to charge ourselves rent via the company? Or can we live on the land rent-free, as long as the company owns the house?
  2. If we sold the land after 1 or 2 years, would there be any requirement to pay back the VAT we reclaimed or sell the property at a value higher than the purchase price?
  3. In order to keep HMRC happy, is there a requirement to have X amount of income going into the company? e.g. If the company made no taxable revenue after the purchase of land and reclaiming of tax, would this break any rules?
Thanks in advance for any thoughts :)

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: VAT on purchase/sale of agricultural land

Postby les35 » Tue Mar 21, 2017 5:00 pm

(Comments for a guide only. Any transaction involving land and Option to Tax, etc needs proper professional advice.)
The limited compnay can claim the VAT as long as (1) it is in business, and (2) will make taxable supplies. You will need to ensure that the onward sale to the partnership is taxable. So, there is a risk of input tax being repaid to HMRC if you do not make taxable supplies.
Will you live in the house, let it or sell it? Depending on the answer, you may not need the limited company.

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: VAT on purchase/sale of agricultural land

Postby AnthonyR » Tue Mar 21, 2017 6:48 pm

I'm not going to touch the VAT - I'll leave that to someone else who knows something about it, but:
[*] If we received planning permission for a residential dwelling on the land, would we have to sell that part of the land back to ourselves as individuals, or be forced to charge ourselves rent via the company? Or can we live on the land rent-free, as long as the company owns the house?
If you sell it back to yourself, the company will be taxed on the gain.
You can rent it from the company at market value
If you live rent free you will be taxed on the benefit in kind value

As Les35 mentioned, get some VAT advice from a specialist as there may be some solutions to the issue.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


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