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Purchase of commercial property then conversion to residential without paying VAT?

Wed, 12/05/2010 - 08:50 — daddycoops

Hi,

Am considering buying a commercial property that has VAT payable but want to convert to residential immediately. I was told that it is possible to avoid the VAT if the property is converted within a set timescale of two years or similar. Can anybody verify this and how/where can I find out more?

Thanks in advance!

VAT on new build properties ›
Thu, 13/05/2010 - 10:20 — admin

Purchase of commercial property for conversion to residential

Hi daddycoops

Yes there is such a scheme. You can find details of it in section 3 of VAT Notice 742A: Opting to Tax Land and Buildings here on teh HMRC website: http://tinyurl.com/3g32uz.

Normally if a commercial property owner/vendor has opted to tax a property, he has to charge VAT when he sells it. But if the purchaser intends to use or convert the property as a dwelling/dwellings or certain types of residential use, he can give the owner a certificate (Form VAT 1614D) which means that the owner can't charge VAT on the sale.

The important point is that the certificate must be given to the owner/vendor BEFORE THE PRICE IS LEGALLY FIXED, ie before contracts are signed, heads of terms etc. So it's important that you do this before anything is agreed about price.

The details are in the Notice and the Form can be downloaded from the HMRC website here http://tinyurl.com/le7vfh.

It's normal in these cases for the sales contracts to include reference to the VAT issues so your solicitor will probably need to know what you're planning to do before he starts to draw up the documentation.

Marie

Thu, 20/05/2010 - 15:00 — daddycoops

You don't know happy I was to hear that news!

Marie,

Thanks ever so much for finding this out, I am extremely grateful to you and excited about the fact that one of my major hurdles has just fallen! All thanks to you!

Yours sincerely
Rob

Sat, 22/05/2010 - 13:26 — admin

Hi Rob

Glad to hear I could help, hope your project goes to plan! Just be careful about the detail of the VAT stuff, it's easy to make mistakes that could mess things up.

Guess it goes without saying that I'd appreciate you mentioning vatexchange to anyone you know who might need VAT advice - accountants, solicitors, anyone in the property business.

Marie