Kingston Smith Property Alert
Law changes often cause problems, so if you are considering selling a commercial property that is subject to an option to tax, make certain you are aware of the new rules. You should be aware of a VAT law change which affects property from 1st June 2008.
If you are selling a commercial property that might be converted into residential use, the buyer can now serve you (the vendor) a form which removes your option to tax, which could cause you to repay input tax that you had reclaimed for up to ten years. This can also affect you as a vendor if there is a chain of buyers, where the ultimate acquirer plans to convert it.
It is inevitable with new law, especially in this area, that someone is going to get a nasty shock. An option to tax that unexpectedly gets disapplied can cause some difficult input tax recovery issues.
If your potential buyer serves you such a notice before you have fixed the price (such as the exchange of contracts), you can seek to adjust the price of your building to take into account the tax that you will now be required to repay to HMRC, or in extreme cases consider seeking a new buyer. Most importantly, you should seek good professional advice before making a decision.
ABOUT KINGSTON SMITH’S PROPERTY TEAM
Kingston Smith is a top 20 firm of Chartered Accountants. We have considerable experience in the property sector through working with clients in property development, construction, investment, management, rental and trading. We help these clients run their businesses more successfully by providing practical advice such as planning ownership structures to minimise their tax exposure, accounting services to help with financial efficiency, and helping source alternative methods of funding.
To find out more about Kingston Smith’s bespoke services to the sector please visit:
If you would like to discuss how the VAT changes might affect your business going forward, please feel free to contact Martin Muirhead on 020 7566 3705 or firstname.lastname@example.org or Adrian Houstoun (VAT Partner) on 020 7566 3802 or email@example.com.