Auction house

94shane

Hi,

A property had a receiver appointed & is now being auctioned.

The VAT section has been changed & now they want the joint option to tax the sale. As far as I can see they don't have the VAT history of the property & this avoids any possible liability?

Does this mean that VAT of 13.5% will be added to the sale price? Any other consequences? I have asked a solicitor for his advice but just wondering if anyone has experience of this.

94shane

3.2 The Sale of the Subject Property is of a Freehold/Freehold Equivalent Interest in the Subject
Property, which is otherwise exempt. The Purchaser is a Taxable Person which status the Purchaser
warrants to the Vendor. The Joint Option to Tax the Sale under Section 94(5) of the VAT Act or Section
94(7)(b) as appropriate of the VAT Act; is hereby exercised by the Vendor and the Purchaser. The
Purchaser shall account to Revenue for any VAT arising on the Sale upon a reverse charge basis in
accordance with Section 94(6) or Section 94(7)(b) as appropriate of the VAT Act
3.3 Unless previously supplied at or prior to the signing hereof, the Vendor shall supply to the
Purchaser answers to any pre-contract VAT enquiries raised by the Purchaser; and such other
information in relation to the VAT history of the Subject Property as the Purchaser, acting reasonably,
shall in writing require in order to comply with the Purchaser’s obligations in respect of the Subject
Property under the VAT Act.
The Purchaser acknowledges that the Receiver as vendor may not have access to all records pertaining
to the VAT history of this property and that all information provided is done so in good faith and based
on the information available to the Receiver and where appropriate using reasonable assumptions.
The obligations imposed on the Parties under this Agreement shall be in addition to the obligations
imposed in relation to the Sale by the VAT Act.

Lenar3556

94shane wrote: »

3.2 The Sale of the Subject Property is of a Freehold/Freehold Equivalent Interest in the Subject
Property, which is otherwise exempt. The Purchaser is a Taxable Person which status the Purchaser
warrants to the Vendor. The Joint Option to Tax the Sale under Section 94(5) of the VAT Act or Section
94(7)(b) as appropriate of the VAT Act; is hereby exercised by the Vendor and the Purchaser. The
Purchaser shall account to Revenue for any VAT arising on the Sale upon a reverse charge basis in
accordance with Section 94(6) or Section 94(7)(b) as appropriate of the VAT Act
3.3 Unless previously supplied at or prior to the signing hereof, the Vendor shall supply to the
Purchaser answers to any pre-contract VAT enquiries raised by the Purchaser; and such other
information in relation to the VAT history of the Subject Property as the Purchaser, acting reasonably,
shall in writing require in order to comply with the Purchaser’s obligations in respect of the Subject
Property under the VAT Act.
The Purchaser acknowledges that the Receiver as vendor may not have access to all records pertaining
to the VAT history of this property and that all information provided is done so in good faith and based
on the information available to the Receiver and where appropriate using reasonable assumptions.
The obligations imposed on the Parties under this Agreement shall be in addition to the obligations
imposed in relation to the Sale by the VAT Act.

It’s a clause commonly appearing in receivership sales to avoid the need for establishing the vat history where it’s a business to business sale. But a difficulty arrises when the purchaser is a not registered for VAT in the context of the sale, and consequently cannot enter into the joint option to tax. (A tax status which the receivers solicitor will say you warranted to them by bidding on the property in the first instance)

It’s not as simple as paying VAT on the purchase price, as the VAT at issue is that which was recovered at the time of construction, so really the VAT history has to be established.

In my limited experience, the vendor often is prepared to enter into some discussions with the successful bidder and ultimately establish the vat history. Otherwise the sale is lightly to fall through, potentially with a loss of deposit by the successful bidder.

When was the property constructed? Was it ever previously sold since construction?

It would want to be particularly good value to warrant the hassle of the above.

94shane

It was constructed in 1983 & sold in 2004.

It is good value - well, the reserve price is anyway, will have to see where it goes from there.

Thanks for any help on this.

Lenar3556

94shane wrote: »

It was constructed in 1983 & sold in 2004.

It is good value - well, the reserve price is anyway, will have to see where it goes from there.

Thanks for any help on this.

Hard to see how there could be any VAT liability on that. 20 years is generally the cut off.

You need professional advise from your solicitor in any case.

Bear in mind built in 1983 may require a nice bit of renovation!

94shane

Lenar3556 wrote: »

Hard to see how there could be any VAT liability on that. 20 years is generally the cut off.

You need professional advise from your solicitor in any case.

Bear in mind built in 1983 may require a nice bit of renovation!

Ya a good bit of renovation but I can do a lot of the work myself - had a good poke around there last week.

Do you think there would have been anything Vat related from 2004? Or would it just be related to 1983?

Hopefully the solicitor will be in contact tomorrow.

Lenar3556

94shane wrote: »

Ya a good bit of renovation but I can do a lot of the work myself - had a good poke around there last week.

Do you think there would have been anything Vat related from 2004? Or would it just be related to 1983?

Hopefully the solicitor will be in contact tomorrow.

Not really - unless it was bought by a developer in 2004 who extensively renovated it in the course of a business, but even at that any potential for renovations clawback usually ends after 10 years.

(It can be an issue with newer property, and get messy, hence the receivers desire to invoke the joint option to tax where possible.)

Notwithstanding the above, the position would need to be agreed with vendor, they will need to satisfy themselves of the position and amend the VAT clause accordingly. Something that they probably won’t enter into with you until after the auction.

nuac

Mod
Legal advice is advisable before signing any contract - even more so on a purchase from a receiver