VAT when buying a house

Coburger

Hi,

I'm interested in buying a house in a receivership sale. I had a bid accepted several weeks ago and have just received the contract.

I have now been informed that the buyer of this property has to pay 13.5% VAT. Why is this? The house is around fifteen years old so why does a buyer have to pay the VAT for it?

Should the estate agent not have advertised this fact?

Any thoughts would be much appreciated.

Geuze

New houses, never lived in, include 13.5% VAT in the selling price.

Coburger

Geuze wrote: »

New houses, never lived in, include 13.5% VAT in the selling price.

The house I'm interested in was built around fifteen years ago and was advertised as residential property.

If it turns out that it is in fact commercial property, then is that where the 13.5% comes in.

Does anyone know if this is then false advertising by the estate agent?

barneystinson

Coburger wrote: »

The house I'm interested in was built around fifteen years ago and was advertised as residential property.

If it turns out that it is in fact commercial property, then is that where the 13.5% comes in.

Does anyone know if this is then false advertising by the estate agent?

It's only false advertising if they knew about it.

edward2222

I'm not really sure about this,
but as far as I remember, its usually the seller in property transactions - rather than the buyer to which the transaction is made.
Whenever the seller makes a standard-rated(SR) or zero-rated(ZR) supply, it must account to HMRC for VAT.
The seller should accounts to HMRC for that VAT each quarter , unless special rules allow a shorter period to be used.

You can actually report that if you want.

barneystinson

edward2222 wrote: »

I'm not really sure about this,
but as far as I remember, its usually the seller in property transactions - rather than the buyer to which the transaction is made.
Whenever the seller makes a standard-rated(SR) or zero-rated(ZR) supply, it must account to HMRC for VAT.
The seller should accounts to HMRC for that VAT each quarter , unless special rules allow a shorter period to be used.

You can actually report that if you want.

Eddie.

This is IRELAND. We don't have a HMRC...

edward2222

barneystinson wrote: »

Eddie.

This is IRELAND. We don't have a HMRC...

hhhmmmm, wait barney,
he didnt state that hes from IRELAND.
so I used HMRC since its more general,
and much common government agency.

barneystinson

edward2222 wrote: »

hhhmmmm, wait barney,
he didnt state that hes from IRELAND.
so I used HMRC since its more general,
and much common government agency.

Eddie, are you having a laugh, THIS IS AN IRISH WEBSITE FULL OF IRISH PEOPLE TALKING ABOUT IRISH STUFF.

CIARAN_BOYLE

edward2222 wrote: »

hhhmmmm, wait barney,
he didnt state that hes from IRELAND.
so I used HMRC since its more general,
and much common government agency.

boards.ie is an Irish website specialising in Irish knowledge for Irish people being from Ireland is assumed with most queries.

edward2222

CIARAN_BOYLE wrote: »

boards.ie is an Irish website specialising in Irish knowledge for Irish people being from Ireland is assumed with most queries.

Okay Okay, my bad.

alex131

barneystinson wrote: »

It's only false advertising if they knew about it.

Hey,

I'm in similar situation: the property was advertised on daft with the "asking price - 160k". We agreed 156k with the estate agency. Having bad experience already, I also specifically asked the agent, if the property is being sold by another company (not a private person) and they guy said that it is not a company.
Now, I'm looking at the contract and seeing the whole section, which says that "In addition to the Purchase Price, the Purchaser shall pay to the Vendor the amount of any VAT as shall be exigible in relation to the Sale..."
The property is 9 years old and was previously lived in. Since there is no VAT on second hand properties in Ireland, my only understanding, is that the Vendor himself is representing a VAT registered company and he/she is trying to push this additional cost onto me.
2 questions emerge:

1. why wasn't I informed about this extra cost by the agent upfront - offer was placed within 156k, hard stop
2. It seems like, in this country, the buyer is completely unprotected against unqualified agents and greedy solicitors. By this I mean the following:
a) why my 6k deposit should stay with the agency where I can have this money "working" on my savings account?
b) In case I'll opt out now (it's an additional 20k to pay!) - why should I pay my solicitor since no deal was made?

Seems like a perpetum mobile business for solicitors.

Alex

barneystinson

alex131 wrote: »

Hey,

I'm in similar situation: the property was advertised on daft with the "asking price - 160k". We agreed 156k with the estate agency. Having bad experience already, I also specifically asked the agent, if the property is being sold by another company (not a private person) and they guy said that it is not a company.
Now, I'm looking at the contract and seeing the whole section, which says that "In addition to the Purchase Price, the Purchaser shall pay to the Vendor the amount of any VAT as shall be exigible in relation to the Sale..."
The property is 9 years old and was previously lived in. Since there is no VAT on second hand properties in Ireland, my only understanding, is that the Vendor himself is representing a VAT registered company and he/she is trying to push this additional cost onto me.
2 questions emerge:

1. why wasn't I informed about this extra cost by the agent upfront - offer was placed within 156k, hard stop
2. It seems like, in this country, the buyer is completely unprotected against unqualified agents and greedy solicitors. By this I mean the following:
a) why my 6k deposit should stay with the agency where I can have this money "working" on my savings account?
b) In case I'll opt out now (it's an additional 20k to pay!) - why should I pay my solicitor since no deal was made?

Seems like a perpetum mobile business for solicitors.

Alex

Has anyone actually confirmed to you that vat applies to this transaction?

alex131

barneystinson wrote: »

Has anyone actually confirmed to you that vat applies to this transaction?

No, not yet . We got the contract few weeks ago and there is an ongoing, 4 month of legal ping pong conversation between my and vendor's solicitor regarding other topics, such as deeds of rectification for land registry (turned up that the vendor's wife is actually a registered land owner), current mortgage discharge intention for the Bank etc.
The sentence I've quoted in my post above is part of "special conditions" section of the contract however. So, my understanding is that if VAT doesn't apply, this sections shouldn't even be there. I've noticed this only today and will be checking with my solicitor on Tuesday ASAP...
Still, don't feel too comfortable now...

Marcusm

barneystinson wrote: »

Has anyone actually confirmed to you that vat applies to this transaction?

There may very well be VAT on a second hand resi property if the initial purchaser had used it in a leggings business for which he was VAT registered, I'd charging VAT on the rent. This would have been sensible for many a sensible investor who was well advised as the recovery of the initial VAT on the construction element may have more than financed the reduced ongoing rents (because a VATable landlord can't charge any more than a non VATable landlord).

barneystinson

Marcusm wrote: »

There may very well be VAT on a second hand resi property if the initial purchaser had used it in a leggings business for which he was VAT registered, I'd charging VAT on the rent. This would have been sensible for many a sensible investor who was well advised as the recovery of the initial VAT on the construction element may have more than financed the reduced ongoing rents (because a VATable landlord can't charge any more than a non VATable landlord).

Not sure how that addresses my question, which was a simple request for clarification... the vast majority of all residential properties owned by individuals will not be taxable on a sale...

Unless the property is "new" which appears unlikely based on the limited available info, or the individual selling it was/is a builder/developer, which again seems unlikely (since you'd expect Alex would know, and have told us, this fact if it were the case).

That only leaves a joint option to tax, which clearly Alex is not going to agree to.

So while you can theorise and hypothesise all you like Marcus, the answer to Alex's question is not one that we can give him - it is a straightforward matter to be resolved by enquiry, and if necessary by amendment of the contract.

Marcusm

barneystinson wrote: »

Not sure how that addresses my question, which was a simple request for clarification... the vast majority of all residential properties owned by individuals will not be taxable on a sale...

Unless the property is "new" which appears unlikely based on the limited available info, or the individual selling it was/is a builder/developer, which again seems unlikely (since you'd expect Alex would know, and have told us, this fact if it were the case).

That only leaves a joint option to tax, which clearly Alex is not going to agree to.

So while you can theorise and hypothesise all you like Marcus, the answer to Alex's question is not one that we can give him - it is a straightforward matter to be resolved by enquiry, and if necessary by amendment of the contract.

That seems unnecessarily aggressive; the receiver sale of a secondhand apartment may very likely be from a VAT registered person in the circumstances I've outlined or as the receiver of a developer retained apartment in a long finished development. You may not be aware but there are lots of such sales about. The question was why VAT might be charged on such a sale not whether the OP should be willing to pay more because of such circumstances, clearly he should not!

barneystinson

Marcusm wrote: »

That seems unnecessarily aggressive; the receiver sale of a secondhand apartment may very likely be from a VAT registered person in the circumstances I've outlined or as the receiver of a developer retained apartment in a long finished development. You may not be aware but there are lots of such sales about. The question was why VAT might be charged on such a sale not whether the OP should be willing to pay more because of such circumstances, clearly he should not!

No aggression intended, but you appeared to be lecturing.

If you reread the last few posts you'll see there was a new question by a different poster - involving a sale by an individual. His concern was specifically about the reference to VAT in the special conditions. His questions were based on an assumption that VAT is to be added to the 156k, but that hasn't actually been established as a fact.

The simple fact is that while we could speculate at great length about the various types of circumstance that would result in a taxable supply, all Alex has to do is go and get the professionals engaged in the transaction to do their jobs.

alex131

barneystinson wrote: »

No aggression intended, but you appeared to be lecturing.

If you reread the last few posts you'll see there was a new question by a different poster - involving a sale by an individual. His concern was specifically about the reference to VAT in the special conditions. His questions were based on an assumption that VAT is to be added to the 156k, but that hasn't actually been established as a fact.

The simple fact is that while we could speculate at great length about the various types of circumstance that would result in a taxable supply, all Alex has to do is go and get the professionals engaged in the transaction to do their jobs.

Totally agree . I hope to get this clarified with the agent and my solicitor's help this week and will surely let you guys know. If the VAT is required, I'll ask for the reason. I really hope it's just a contract "copy paste" kind of issue with the vendor's solicitor. The other point I was trying to make, is the fact, that buyer should be somehow protected against unnecessary cost of engaging the solicitor in the sale which is set to failure from the start. But, this is not for this forum.

alex131

Hi All,

So, as per my solicitor (and now confirmed with the vendor) the VAT related section of the contract was inserted to our contract as part "of the standard contract template" they use for sale. VAT doesn't apply to this transaction. I'm still confused with the fact that this section is in the contract, while it is clearly stated that that it is a "special condition" clause and shouldn't be applicable for second hand, private sales. Anyway, at least I can still proceed with purchase on this stage.
BTW, if you want to have a look at the clause I'm referring to, try to google "In addition to the Purchase Price, the Purchaser shall pay", including quotes. It should come up as a first result (pdf).

Thanks everyone for your responses!

nompere

alex131 wrote: »

Hi All,

So, as per my solicitor (and now confirmed with the vendor) the VAT related section of the contract was inserted to our contract as part "of the standard contract template" they use for sale. VAT doesn't apply to this transaction. I'm still confused with the fact that this section is in the contract, while it is clearly stated that that it is a "special condition" clause and shouldn't be applicable for second hand, private sales. Anyway, at least I can still proceed with purchase on this stage.
BTW, if you want to have a look at the clause I'm referring to, try to google "In addition to the Purchase Price, the Purchaser shall pay", including quotes. It should come up as a first result (pdf).

Thanks everyone for your responses!

No-one ever really explained the condition properly to you, as fas as I can see.

It says "the purchaser shall pay such amount of VAT as is exigible ... etc". It's pretty much always left in contracts, because if there is VAT then the purchaser has to pay it, and if there isn't VAT, as in your case, then it actually means nothing. But you're right - it is confusing. It's there in the standard special conditions that the Law Society drafted - and there it stays.