VAT on purchase of Commercial Premises

delta1970 · 26-10-2010 1:37pm #1

Hi all, A charity Organisation I am a member of is currently considering purchasing a Industrial type building. It was built approx 7 - 8 yrs ago. It was leased for some time and that lease is finished and the owner is selling the building on. Its really good value at the moment. As it is built over 5 years ago - regarding the new "Vat rules" on purchasing a commercial premises (July 2008) is this building classified as an old building therefore no VAT is applicable. As we are a Charity we are not VAT exempt and having to pay VAT @ 13.5% on this premises would be an added extra cost. Any advise would me most appreciated. Dave

christy c · 26-10-2010 7:10pm

Yes this building is not classified as new. Therefore VAT does not have to be charged on the sale . However if the owner has revovered VAT on the original cost price, they would would have to repay a portion if they do not charge VAT on the sale. Therefore they will want to charge you VAT(which they have the option of doing).

You will be able to recover the VAT on the purchase price but if you sell it within the next 20 yrs without charging VAT you will have the same problem as the original owner. Therefore they will probably offer two different prices e.g. €100,000 + VAT or €105,000 with no VAT as they will want you to take the price plus VAT(to avoid them having to pay anything back to Revenue).

Don't think I explained that well but if you have any more questions i'll do my best to answer them.

I will check to see if there are any other rules I forgot about

delta1970 · 26-10-2010 7:32pm

Thank you for your answer Christy C. It explains some of what I've been told. This premises is divided into 6 seperate units (buildings) The owner has sold 4 of them over the past few years and had leased the last 2. It is these that he is now selling at a really good price. He was a builder and it suffering with the recession like most at the moment. The auctioneer told us that he thought we had to pay vat. It might be worth going direct to the owner to see if he would sell without vat. He may have paid back any vat he owes the revenue by now if that was the case. Thanks for your information, unfortunately if we have to pay Vat we will not be able to recover the VAT on the purchase price as our Charity is not Vat registered. Would you know it possible to find out the "Vat history" on the property.

Seamus Philbin · 26-10-2010 7:38pm

delta1970 wrote: »

Hi all, A charity Organisation I am a member of is currently considering purchasing a Industrial type building. It was built approx 7 - 8 yrs ago. It was leased for some time and that lease is finished and the owner is selling the building on. Its really good value at the moment. As it is built over 5 years ago - regarding the new "Vat rules" on purchasing a commercial premises (July 2008) is this building classified as an old building therefore no VAT is applicable. As we are a Charity we are not VAT exempt and having to pay VAT @ 13.5% on this premises would be an added extra cost. Any advise would me most appreciated. Dave

Vat is a complicated area especially vat on property. If the previous owner claimed back vat on it then most likely he will want to charge the vat onwards otherwise he can get hit for the vat he already claimed back or a portion on it. This is called the capital goods scheme. Look it up on the revenue website but you would really need to talk to a vat expert in either your solicitor or accountants office. Dont sign any agreement until you get advice on the vat.

christy c · 26-10-2010 7:50pm

delta1970 wrote: »

Thank you for your answer Christy C. It explains some of what I've been told. This premises is divided into 6 seperate units (buildings) The owner has sold 4 of them over the past few years and had leased the last 2. It is these that he is now selling at a really good price. He was a builder and it suffering with the recession like most at the moment. The auctioneer told us that he thought we had to pay vat. It might be worth going direct to the owner to see if he would sell without vat. He may have paid back any vat he owes the revenue by now if that was the case. Thanks for your information, unfortunately if we have to pay Vat we will not be able to recover the VAT on the purchase price as our Charity is not Vat registered. Would you know it possible to find out the "Vat history" on the property.

I'm studying this at the moment but I can ask at work tomorrow. From what I can gather from your posts so far, the builder does not have to charge VAT but might want to as I tried to explain above. What he might try to do is try to charge you the ex VAT price plus whatever he has to repay and therefore would not be charging you VAT. As said by previous poster it is very complex. Talk to the builder and see what he says also get other advice.

delta1970 · 27-10-2010 11:10pm

Hi all, Thank you for all your answers - you have answered my question and I understand the issues that you have pointed out. We will discuss with the property owner and suggest to him that we may be able to sell to us without vat and depending on what vat is owed we may be able to pay that for him. Thanks again

Annmarir1963 · 19-05-2014 9:27pm

I have bought a commercial property at an agreed price with a local auctioneer and paid a deposit one month later he has rang me and said the is vat to go onto the price which I cannot afford the building is overseven years old what are my options

dbran · 20-05-2014 1:04pm

Hi

Always seek professional advice when it comes to VAT on property (preferably before you sign the contract).

dbran

VAT on purchase of Commercial Premises

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