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LPC Law Notes Property Law and Practice Notes

Vat And Commercial Property Notes

Updated Vat And Commercial Property Notes Notes

Property Law and Practice Notes

Property Law and Practice

Approximately 490 pages

A collection of the best LPC PLP notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

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VAT and Commercial Property

Definition Tax rate Outcome for Seller/Landlord Outcome for Buyer/Tenant
NEW Completed within 3 years prior to sale Standard rate = 20%

Will be able to recover input tax incurred in developing the site.

If using SCPC, need to incorporate condition A1 in Part 2 SCPC to charge VAT in addition to the agreed purchase price (SCPC 1.1.4 – sale doesn’t constitute a VAT supply)

If tax sensitive, may be reluctant to purchase.

If not tax sensitive, can offset the input tax paid on purchase with their own output tax.

NB – paying VAT in addition to purchase price may buyer’s financial arrangements.

OLD

P62 Civil Lit

 Completed over 3 years prior to sale Exempt, but option to tax

  1. Seller has option of recovering input tax on repair or refurbishment.

  2. The problem with opting to tax is that VAT would have to be charged on the purchase price on the sale and if buyer is a Co., it may not be able to recover any VAT (because it does not make VAT able supplies in the course of its business).

  3. The buyer might thus object to seller opting to tax or seek a reduction in the purchase price to compensate it for the irrecoverable VAT.

  4. The seller will have to weigh up the benefit of recovering the refurbishment VAT against the potential loss of sale proceeds (or even the sale itself).

  5. If using SCPC, need to incorporate condition A1 in Part 2 SCPC to charge VAT in addition to the agreed purchase price (SCPC 1.1.4 – sale does not constitute a supply for VAT purposes)

If tax sensitive, may be reluctant to purchase if option to tax is exercised

Should try and negotiate provision that Seller will not opt to charge VAT before completion.

If Seller is charging VAT, should negotiate that the price be inclusive of VAT
ANY COMMERCIAL LEASEHOLD PROPERTY When lease is granted Exempt, but option to tax

If option made after grant of the lease, s89 VATA 1994 = rent to be increased by the amount of VAT, unless clause in the lease making the rent inclusive of VAT.

If option made before...

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