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What did you say you were using the building for


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28th August 2013

The case Ebley House Limited addressed the sale of a commercial building that had been opted to tax for VAT purposes.

The purchaser had given the vendor verbal reassurance that following the purchase the building would be used for residential purposes and it is on this basis that the vendor accepted that the option to tax would have no effect and thus sold the property without charging VAT. The associated irrecoverable VAT.was also repaid.

Following the sale of the property the purchaser decided not to change the property to residential use, and instead made a planning application prior to the purchase of the property to use the property for a non-residential purpose. HMRC therefore assessed for VAT on the sale.

The Tribunal found that the intention of the purchaser at the time of purchase was to change the use of the building to residential use and the planning application was merely to keep the purchasers 'options open'. The Tribunal accepted that the vendor had been informed of the purchaser's intention at the point of sale and had consequently restricted VAT recovery.

This case is a timely reminder that it is the intention at the time of the supply that is essential when determining the correct VAT liability. It should be noted however that the legislation post the date of sale of this property states that a certificate should be issued to the vendor to disapply the option to tax.

If any of your clients have disapplied options on properties without obtaining certificates we recommend that you contact us to discuss the implications. We also recommend that if your clients are seeking to purchase properties and change their use you should contact us as there may be VAT saving opportunities. 

About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2013-09-03 09:04:13 in Tax Articles

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