Do you pay VAT on a property?

Do you pay VAT on a property?

Most commercial properties are elected for VAT, in which case the answer is yes. 

Don’t panic, most purchasers are VAT registered, meaning that they can recover the VAT. If you are not registered, there are few buying entities that can’t register themselves prior to purchase.

But how can the VAT be funded prior to its recovery? The transaction can be structured as a Transfer of Going Concern (TOGC). Simplistically it means that VAT does not need to be added to the purchase price. 

There are some exceptions where a transaction cannot be treated as a TOGC, for example, if the property is vacant. A purchaser would then need to fund the additional amount, although if needed, there are lenders who specialise in helping purchasers who don’t have the funds. 

There is a double hit though, HMR&C charge stamp duty on the VAT amount as well as the property, which is not recoverable. The effect is an additional 1% stamp duty cost on the purchase price. Kingly does not believe this is fair and has challenged their charging tax on tax, which has been met with deaf ears at Westminster, reducing the amount of tax they receive from the property industry, fair or not, is not a concern of theirs.

If you’re looking to purchase a property in London’s West End or have a property to sell in Covent Garden, Soho and the surrounding areas, then drop us a line and we’ll discuss your requirements in more detail.