Can I get the VAT back?

12th April 2019

If you are buying a “new” commercial building (less than three years old) or one on which the seller has “opted to tax”, VAT at 20% will be added to the price. Whether you can get that back depends on how and by whom the building will be used and there are a surprising number of pitfalls and opportunities to consider.

If a buying business occupies the property itself, and that business charges VAT on all it does, then the VAT is recoverable. However, if the building cost £250k or more (+ VAT), that VAT reclaim may be clawed back if there is a sale or change of use within 10 years and advice should be taken beforehand.

If the property will be let, to reclaim the VAT the buyer will need to opt to tax the property himself and charge VAT on the rent. This is a new option - the seller’s option does not move with the property.

If the property is already let and the tenant will remain in occupancy, the Transfer of Going Concern rules may apply and the VAT charge avoided but there are some complex conditions.

If none of the above apply, it may be possible to change the deal to make it fit – for instance, maybe buy through a new company.

Or it may be possible to lift the seller’s option, if the option is more than 20 years old or if the buyer will use the property for development into dwellings. But none of these are easy – strict conditions apply.

An extra 20% on a building purchase is a lot of money to risk and advice should always be taken before you act. After you have bought may be too late.

For more information contact Robert Bailey, tax director at Bishop Fleming, on 01872 275651, rbailey@bishopfleming.co.uk or visit www.bishopfleming.co.uk.

Share

Related insights