I have a client operating as a Ltd. company who is looking to sell the business assets as he is winding down the company. A potential buyer has asked if the land is VAT electable. This is not something I have dealt with before and have read as much info on HMRC and the relevant VAT notices as I can find but I would just like some extra advice.
My understanding is that this will not be a TOGC and that if my client puts an OTT on the land he will have to charge VAT on the sale price and pay this over to HMRC minus the VAT on any selling costs. The new owner will pay input VAT and can then charge VAT on any rental of the property and future sale of the property.
First of all is my understanding above correct?
Secondly how would this affect my client other than the large VAT bill which will result from the transaction?
Thanks in advance for any comments/help/advice provided.
This is one of those issue which really needs some fuller paid-for advice. TOGC with or without an Opted property is a minefield!
Is the business still on-going? Or closed? What is being transferred? What is the property used for? What is the nature of the business? Is the new owner going to carry on essentially the same business?
Too many variables to offer a full answer here!
I appreciate you taking the time to respond. I thought as much and have went back to the client with a host of questions of my own, some of which you have outlined below. I am still waiting for answers.
From what I gather the building and land are being transferred but with a view to demolish the building, I do not yet know what the new owner plans to use the land for. My client still has the business running as a going concern.
I think I need to concede that this is outside of my knowledge base and pass this on to someone else, I must admit though I do like coming across these scenarios of things I haven't yet been involved in as it is always a good motivator to start learning new things!
If the building is to be demolished, and the business operated from that building, it cannot be a TOGC. But the VAT options might be better for the purchaser.
