Confused - TOGC!
Ok, so we ended up purchasing a commercial hotel room at guaranteed income for 5 years, several years back. We 'opted to tax'
We are now selling and are coming across stuff that we are not sure about (another reason why we shouldn't have strayed into this kind of investment in the first place). If TOGC criteria apply, we must not charge VAT (nor do we want to).
The purchasing company has applied for VAT registration and has been successful - it has a registration number, but the VAT certificate may take several weeks to arrive as the company is registered overseas. So I think OK on that front in terms of one of the criteria being met.
The other key one is the option to tax - the form has been signed and submitted by the purchaser, but confirmation of receipt by HMRC has not happened yet - they said it could take several weeks to receive this, and are keen to proceed with completion.
Our lawyer is then also saying, 'however if HMRC find TOGC criteria are not met, you will have to pay the VAT and recover it from the buyer. Their lawyer is saying, as long as you are using a cash accounting basis for VAT, in the event this happens, you would simply issue a VAT invoice to his client's company post-completion and would only have to account for the VAT to HMRC once the company had paid this invoice.
Is that correct?
Or are we liable first for the VAT if HMRC deem it not to be a TOGC and then have to claim back from purchaser - this is a large sum and could get costly, so is there any merit in waiting for this confirmation from HMRC that the purchaser's option to tax has been received - our lawyer is saying although HMRC do normally acknowledge receipt, they don't need to for the option to tax to take legal effect - but in another post, somebody mentioned a similar situation where HMRC said they hadn't received it, and the purchaser had to re-send after completion, and this was 40 days after the relevant date, which meant HMRC deemed it not to meet TOGC criteria!
Any wisdom would be gratefully received, our lawyer is kind of sitting on the fence..which is understandable but doesn't really fill us with great confidence