vat on sale of apartment

Mad_maxx

an apartment which interests me is going to auction next week , it was originally bought in 2007 by a registered company , i do not know how much was paid for it but we are talking the height of the boom

anyway , the vat conditions state that this will be a " transfer of business " , relief can be granted but only if the purchaser is themselves vat registered , i am not vat registered and will not be so would have to absorb the 13.5% vat cost , i could live with that as the reserve is low and i know how far above im willing to go

however , i have come across a piece on the deloitte website which states that in some situations , the vat chargeable is based on the original purchase price and you could end up paying nearly as much in vat as the cost of the property itself ?

any opinions welcome and just to reiterate , i cannot remain vat registered long term , i could become vat registered for the sake of the purchasing exercise but would need to de-register soon after

im also aware that vat on the sale of second hand residential property is not common but trust me , it does apply in some cases and ive checked this out

Calahonda52

Mad_maxx wrote: »

an apartment which interests me is going to auction next week , it was originally bought in 2007 by a registered company , i do not know how much was paid for it but we are talking the height of the boom

anyway , the vat conditions state that this will be a " transfer of business " , relief can be granted but only if the purchaser is themselves vat registered , i am not vat registered and will not be so would have to absorb the 13.5% vat cost , i could live with that as the reserve is low and i know how far above im willing to go

however , i have come across a piece on the deloitte website which states that in some situations , the vat chargeable is based on the original purchase price and you could end up paying nearly as much in vat as the cost of the property itself ?

any opinions welcome and just to reiterate , i cannot remain vat registered long term , i could become vat registered for the sake of the purchasing exercise but would need to de-register soon after

im also aware that vat on the sale of second hand residential property is not common but trust me , it does apply in some cases and ive checked this out

You think this will wash with revenue?

Calahonda52

From Vat return on ROS, in addition it will take 6 to 8 weeks to get registered

ismat

if you use TOB the original CGS will transfer to you. The exposure at this time would be approx 8/20 of the original vat claimed. You would have to pay this to revenue in full when preparing your first vat return if not carrying out a vat able activity. I don’t believe TOB can be used in this instance. You need to get a CGS schedule in any case to quantity your possible vat exposure

Mad_maxx

Calahonda52 wrote: »

You think this will wash with revenue?

elaborate please ?

tax_tutor1

To register for VAT you need to be carrying out on a vatable activity ie a business or trade which is liable to VAT. If you intend to reside in the apartment this option would not be available to you.
The transfer of business vat relief/exemption only applies where a business which has claimed a VAT credit on the purchase of a number of assets disposes of some or all of those assets. The assets being disposed of must consist of an undertaking or part thereof and be capable of being run on an independent basis. The new purchaser must be entitled to 100% input credit in respect of the purchase.
Single asset sales/purchases almost never qualify for this relief/exemption.
Clearly a case where you need to obtain professional tax advice!

Mad_maxx

ismat wrote: »

if you use TOB the original CGS will transfer to you. The exposure at this time would be approx 8/20 of the original vat claimed. You would have to pay this to revenue in full when preparing your first vat return if not carrying out a vat able activity. I don’t believe TOB can be used in this instance. You need to get a CGS schedule in any case to quantity your possible vat exposure

if its 8/20 of the original , using 250 k as a purchase price in 2007 ( athlone would not have been higher than that ) , that would leave me with a 13500 vat bill or thereabouts .

i spoke to a tax consultant briefly about becoming vat registered for the purpose of the buying exercise and she told me i could become vat registered for one full day as a means of getting the deal over the line , she knew the auction was in a few weeks and that the window for closing was four weeks , other poster ( calahonda ) seems to think there is a waiting period to become vat registered which stretches beyond thirty days ?

bear in mind , i would not mind paying the 13500 vat without intending to claim it back if 8/20 is the quantifiable amount ? , is it a must to become vat registered in order to buy such a property even one is prepared to swallow the vat bill ?

Mad_maxx

tax_tutor1 wrote: »

To register for VAT you need to be carrying out on a vatable activity ie a business or trade which is liable to VAT. If you intend to reside in the apartment this option would not be available to you.
The transfer of business vat relief/exemption only applies where a business which has claimed a VAT credit on the purchase of a number of assets disposes of some or all of those assets. The assets being disposed of must consist of an undertaking or part thereof and be capable of being run on an independent basis. The new purchaser must be entitled to 100% input credit in respect of the purchase.
Single asset sales/purchases almost never qualify for this relief/exemption.
Clearly a case where you need to obtain professional tax advice!

i own a few buy to lets already and a small sheep farm , i am not vat registered and never have been , i would plan to continue letting this property to the tenant who resides there presently

this being a distressed asset being sold at auction , the receiver takes a position where regardless of whatever unknowns exists re_ vat , the burden always rests with the purchaser

the trouble with these auction properties is the nature of an auction shields the vendor from everything and anything , no matter what a tax consultant says in terms of my having a right to disagree with aspects of the vat conditions , a contract for sale clause ( however spurious ) protects the vendor , heard it said that in these circumstances the receivers wont even spend time listening to the views of a tax consultant who points out glaring flaws in the tax conditions attached

Robert McGrath

VAT on property question on a residential property originally purchased before 1 July 2008? Probably waiver of exemption issues here?

Jesus Christ, get professional advice. There are a million wrinkles involved

Mad_maxx

Robert McGrath wrote: »

VAT on property question on a residential property originally purchased before 1 July 2008? Probably waiver of exemption issues here?

Jesus Christ, get professional advice. There are a million wrinkles involved

tax consultants ( with proper vat expertise ) are 500 quid per hour and like i said earlier , due to the fact there is no going back with an auction purchase , the vendor can rebuke the best tax minds in the land and charge more than otherwise should be the case as a privilege

most seem to believe no vat applies on residential property but the auction house ( bidx1) have assured me it does in a minority of cases , especially when the property was originally bought through a company ?

that said , the vat condition might just have been lumped in and be purely academic

ismat

Mad_maxx wrote: »

if its 8/20 of the original , using 250 k as a purchase price in 2007 ( athlone would not have been higher than that ) , that would leave me with a 13500 vat bill or thereabouts .

i spoke to a tax consultant briefly about becoming vat registered for the purpose of the buying exercise and she told me i could become vat registered for one full day as a means of getting the deal over the line , she knew the auction was in a few weeks and that the window for closing was four weeks , other poster ( calahonda ) seems to think there is a waiting period to become vat registered which stretches beyond thirty days ?

bear in mind , i would not mind paying the 13500 vat without intending to claim it back if 8/20 is the quantifiable amount ? , is it a must to become vat registered in order to buy such a property even one is prepared to swallow the vat bill ?

If you were buying private treaty generally the vendor would give you a figure to pay on top of the purchase price if you wished to take the property vat exempt. They would pay this over to revenue to take the property out of the vat net prior to sale You would get the property vat free.

I doubt that this transaction even comes within TOB rules

The vendor would need to give you the required figure.

I don’t think revenue would vat register you in this instance.

Mad_maxx

ismat wrote: »

If you were buying private treaty generally the vendor would give you a figure to pay on top of the purchase price if you wished to take the property vat exempt. They would pay this over to revenue to take the property out of the vat net prior to sale You would get the property vat free.

I doubt that this transaction even comes within TOB rules

The vendor would need to give you the required figure.

I don’t think revenue would vat register you in this instance.

its possible the reason they are selling this property at auction is because the vat history is questionable , either that or they just lump in a bunch of uneccessery vat conditions which in practice are irrelevant to residential property ?

ismat

Mad_maxx wrote: »

its possible the reason they are selling this property at auction is because the vat history is questionable , either that or they just lump in a bunch of uneccessery vat conditions which in practice are irrelevant to residential property ?

There’s a good chance they don’t actually understand the vat position of the property and the rules re same. Unless you are vat registered they can’t do TOB. I don’t believe any purchasers accountant or solicitor would advise them that this is a TOB and revenue would not register someone for vat just to carry out this transaction . The property probably can’t be sold with this condition in the contract

Mad_maxx

ismat wrote: »

There’s a good chance they don’t actually understand the vat position of the property and the rules re same. Unless you are vat registered they can’t do TOB. I don’t believe any purchasers accountant or solicitor would advise them that this is a TOB and revenue would not register someone for vat just to carry out this transaction . The property probably can’t be sold with this condition in the contract

talk about not putting ones best foot forward , the current condition attached will deter the majority of would be buyers , i suspect most people who considering buying apartments are not vat registered ?

unless of course they are exclusively pitching to those who are vat registered ?

as for revenue , what if you didnt tell revenue that you were applying to become vat registered for the purpose of buying property , you then de register following the completion of the purchase exercise ?

ismat

Mad_maxx wrote: »

talk about not putting ones best foot forward , the current condition attached will deter the majority of would be buyers , i suspect most people who considering buying apartments are not vat registered ?

unless of course they are exclusively pitching to those who are vat registered ?

as for revenue , what if you didnt tell revenue that you were applying to become vat registered for the purpose of buying property , you then de register following the completion of the purchase exercise ?

When you do a vat reg you need to set out exactly what your trade is going to be and generally they will call out to view your premises etc. In this case they simply would not register you

It’s not possible to recover vat on residential properties since the rules changed in 2008

The only way you could acquire that property and keep it in the vat net would be to actually buy the company that owns it.

If it was a commercial rental you could apply TOB but not to residential rental property

Mad_maxx

ismat wrote: »

When you do a vat reg you need to set out exactly what your trade is going to be and generally they will call out to view your premises etc. In this case they simply would not register you

It’s not possible to recover vat on residential properties since the rules changed in 2008

The only way you could acquire that property and keep it in the vat net would be to actually buy the company that owns it.

If it was a commercial rental you could apply TOB but not to residential rental property

I don't want to keep the property in the vat net.

Auction house look like a bunch of amateurs here

ismat

Mad_maxx wrote: »

I don't want to keep the property in the vat net.

Auction house look like a bunch of amateurs here

It will have to be sold without vat in the end. Auctioneers will know nothing and care less about any vat issues. Your own solicitor/ accountant will be the best to advise you. ( I’d suggest avoiding the person who told you you could register for one day )

davindub

It would be highly unusual for an apartment to sold with VAT, it is sometimes an issue with commercial property.

But as far as I am aware, if you register for VAT and claim relief (I forget the section), i.e. the seller doesn't collect the VAT, as soon as you deregister for VAT, it may be payable.

Mad_maxx

davindub wrote: »

It would be highly unusual for an apartment to sold with VAT, it is sometimes an issue with commercial property.

But as far as I am aware, if you register for VAT and claim relief (I forget the section), i.e. the seller doesn't collect the VAT, as soon as you deregister for VAT, it may be payable.

Was told by a tax consultant I would - could register for vat to facilitate the purchase but would not claim back the vat

davindub

Mad_maxx wrote: »

Was told by a tax consultant I would - could register for vat to facilitate the purchase but would not claim back the vat

Yes, but if you dereg, then it is repayable.

If it is the scheme I am thinking of, the seller doesn't collect the VAT on the sale and the purchaser doesn't claim the VAT input, but still tye VAT is payable to Revenue if you sell again to a non registered person or the current owner deregs for VAT.

Mad_maxx

davindub wrote: »

Yes, but if you dereg, then it is repayable.

If it is the scheme I am thinking of, the seller doesn't collect the VAT on the sale and the purchaser doesn't claim the VAT input, but still tye VAT is payable to Revenue if you sell again to a non registered person or the current owner deregs for VAT.

You misread what I wrote

I said I was advised not to claim back the vat I pay upon purchase but that becoming vat registered ( for a short period) was necessary in order for the transaction to be completed, i e, it was impossible to buy the thing if not vat registered?

If I thought a willingness to pay the vat cost would negate the need to become vat registered? , that is the path i would choose

I don't want to have to charge vat on rent

Mad_maxx

on an unrelated topic if i may

what is the current situation re_ unoccupied commercial properties when it comes to rates ? , do you have to pay a partial amount to the local authority each year ?

Mad_maxx

As predicted, the property failed to receive a single bid.

I'd happily submit a bid 30% under if I thought a thirty grand vat bill was the worst thing that could happen but it seems i might inherit CGS obligations and be required to keep records for potentially another few decades

This place will probably be stuck in vat limbo for another year

Mad_maxx

ismat wrote: »

When you do a vat reg you need to set out exactly what your trade is going to be and generally they will call out to view your premises etc. In this case they simply would not register you

It’s not possible to recover vat on residential properties since the rules changed in 2008

The only way you could acquire that property and keep it in the vat net would be to actually buy the company that owns it.

If it was a commercial rental you could apply TOB but not to residential rental property

According to the updated vat laws, TOB can apply where a registered tenancy is in place, there is a sitting tenant here under a registered tenancy

That doesn't negate that in order to sell the property under TOB, the purchaser must be vat registered

ismat

Mad_maxx wrote: »

According to the updated vat laws, TOB can apply where a registered tenancy is in place, there is a sitting tenant here under a registered tenancy

That doesn't negate that in order to sell the property under TOB, the purchaser must be vat registered

I still don’t think revenue would register you for vat in this instance

It would be unusual to buy a residential property with a sitting tenant as well but not of course impossible

If I was you I would contact the sellers and tell them you will pay them the amount of vat necessary to take the property out of the tax net in addition to the purchase price. This should be possible to do in a non auction scenario assuming of course they are happy to accept your offer

This will kill any vat issues

Mad_maxx

ismat wrote: »

I still don’t think revenue would register you for vat in this instance

It would be unusual to buy a residential property with a sitting tenant as well but not of course impossible

If I was you I would contact the sellers and tell them you will pay them the amount of vat necessary to take the property out of the tax net in addition to the purchase price. This should be possible to do in a non auction scenario assuming of course they are happy to accept your offer

This will kill any vat issues

there is nothing unusual about buying a residential property with a sitting tenant , many steer clear and you expect to get it cheaper but its in no way rare , anyway there is a clear framework legally for dealing with evictions etc

the vat issue is far more ambiguous , i came across an excellent audio piece from a katie barbour of the law society from a year ago which spells out clearly the situation here , i must now adjust what i earlier wrote

1. TOB does not apply in any sort of practice to the sale of a residential property as its no longer possible to charge vat to residential tenants and thus the CGS cannot be carried on

2. what will likely happen here is the property will be sold but the TOB condition will amount to nothing , its a sneaky device to lull purchasers into a false sense of security surrounding vat and the implication that TOB will save both vendor and purchaser from vat , it will not

in practice the sale price should from the POV of the purchaser be seen as the price + 13.5% vat

i will attempt to buy this property but wont pay the current reserve , even the 13.5% is based on the original purchase price , im ok with that if the purchase price itself is low enough `, as for your suggestion that i contact the vendor and tell them im willing to pay the vat amount outstanding provided they take the property out of the vat net , such is the baseless position they are going with by trying to flog the place via TOB , i can challenge this post auction , they sold a dozen residential properties at auction a few days ago under the same ruse , they obviously see this BS tactic as useful as it results in a higher price once its discovered the reality of the vat situation , all i can do is offer a low price post auction and play along with the fiction that the sale is going through TOB



to summarise , the whole area is still a relative mess and appears to be changing by the year as it tries to get to grip with the fact that selling receivership properties to the public is problematic when the majority of potential buyers are not " accountable persons" - vat registered

ismat

Mad_maxx wrote: »

there is nothing unusual about buying a residential property with a sitting tenant , many steer clear and you expect to get it cheaper but its in no way rare , anyway there is a clear framework legally for dealing with evictions etc

the vat issue is far more ambiguous , i came across an excellent audio piece from a katie barbour of the law society from a year ago which spells out clearly the situation here , i must now adjust what i earlier wrote

1. TOB does not apply in any sort of practice to the sale of a residential property as its no longer possible to charge vat to residential tenants and thus the CGS cannot be carried on

2. what will likely happen here is the property will be sold but the TOB condition will amount to nothing , its a sneaky device to lull purchasers into a false sense of security surrounding vat and the implication that TOB will save both vendor and purchaser from vat , it will not

in practice the sale price should from the POV of the purchaser be seen as the price + 13.5% vat

i will attempt to buy this property but wont pay the current reserve , even the 13.5% is based on the original purchase price , im ok with that if the purchase price itself is low enough `, as for your suggestion that i contact the vendor and tell them im willing to pay the vat amount outstanding provided they take the property out of the vat net , such is the baseless position they are going with by trying to flog the place via TOB , i can challenge this post auction , they sold a dozen residential properties at auction a few days ago under the same ruse , they obviously see this BS tactic as useful as it results in a higher price once its discovered the reality of the vat situation , all i can do is offer a low price post auction and play along with the fiction that the sale is going through TOB



to summarise , the whole area is still a relative mess and appears to be changing by the year as it tries to get to grip with the fact that selling receivership properties to the public is problematic when the majority of potential buyers are not " accountable persons" - vat registered

I was only advising an option that would be the cheapest way to get rid of the vat. I would agree that the area is a mess in that most people do not understand or possibly are not aware of the rules.

If you buy at an auction and one of the conditions is that TOB has to apply then you would need to be sure you can be / are vat registered or you could be sued for non performance?

What I advised you do is an option on the pcve as issued by the law society. I have used it twice in the last few months as a mechanism to reduce the overall cost of a property by clearing out the old CGS

Mad_maxx

ismat wrote: »

I was only advising an option that would be the cheapest way to get rid of the vat. I would agree that the area is a mess in that most people do not understand or possibly are not aware of the rules.

If you buy at an auction and one of the conditions is that TOB has to apply then you would need to be sure you can be / are vat registered or you could be sued for non performance?

What I advised you do is an option on the pcve as issued by the law society. I have used it twice in the last few months as a mechanism to reduce the overall cost of a property by clearing out the old CGS

could they sue?, surely i could easily defend such an action as the TOB vehicle is in there erroneously?, surely the auction setting does not over ride every possible error on their part?

Not sure they will sell through private treaty, auctions are what bidx1 do.

They even expect post auction bids to be unconditional, they used those exact words when i phoned them post auction a couple of days ago, this property went to auction Wednesday and is going to auction in the leftovers auction this coming Tuesday, these are online auctions

I'll certainly ask and suggest but you wonder why they put the thing to auction like this if simply having a higher reserve which would cover the vat liability would save all this bother, a cynic would think they were out to hoodwink and collect some non refundable deposits.

user.name

Do you know that the company originally paid VAT on the building when they purchased it? There are specific rules which allow for a property not to be subject to VAT, namely that it is not regarded as "new" for VAT purposes (check out 2 year and 5 year rule). You need to find out whether (i) the company originally paid VAT on the property and (ii) did they reclaim all of this back?

If they reclaimed this back, you have what is known as the capital goods scheme. Effectively the property must be used for a VATable activity for 20 years after purchase in order not to have any of the VAT that was originally reclaimed, owed back to Revenue. If the company have been letting out the property, this is a VAT exempt activity, so therefore it would be unlikely that they reclaimed the VAT paid on the property if they had paid it.

The reason they would elect to charge VAT on the sale of the property is to prevent further clawback of the VAT, as they would be deemed to use the building for VATable activities after that.

You should find out the specific facts and see whether VAT actually needs to be charged on the transaction. VAT on property is a highly complex area so I would recommend you seek professional advice on this.