Avoid paying VAT on commercial property

[ibby]

Hello guys I have seen an PUB which has been closed down, and looking at purchasing it.

The issue is the asking price is 135k + VAT!

Currently the downstairs is a PUB and the upstairs has a 3 bed flat.

Any ideas on how I can avoid VAT.

ideas?

 

[Bob]

Are you intending to use it as a pub?

 

[ibby]

No

I intend to use the top as a flat and refit the bottom for a shop front.
Pub is at the bottom

thanks for the reply

 

[Bob]

VAT should only be charged on the pub and not the flat. An apportionment of the price will have to be agreed. VAT could have been disapplied completely and not charged if you were intending to convert it into residential property.

By the way, stamp duty is charged on the VAT inclusive price

 

[ibby]

thanks

how would they figure out how much VAT should be charged for the PUB ?

 

[ibby]

this is from the advert sheet
"VAT at the prevailing rate may be charged on 90% of the purchase price where there is living accommodation. On lock-up premises, VAT will be charged on 100% of the purchase price."

Why Maybe ?

 

[saxondale]

if the price had not mentioned "plus vat" would we have been having this conversation?

the price is whatever the total is, you cannot nor should try to "avoid" the VAT.

 

[Bob]

Avoidance is legal - evasion is not

... and if he had been intending to use it for residential purposes, he could quite legally have avoided the tax

 

[ibby]

I rather spend that money on the property that give even more TAX and VAT.

 

[saxondale]

Avoidance is legal - evasion is not

... and if he had been intending to use it for residential purposes, he could quite legally have avoided the tax

yes, it says that higher up the page. He isn`t using for that though, is he? and if he was no doubt the question would be "how do i avoid stamp duty?"

 

[ibby]

No,
I dont mind paying Stamp Duty.
Its the VAT thing I cant get my head around.

 

[ibby]

if the price had not mentioned "plus vat" would we have been having this conversation?

the price is whatever the total is, you cannot nor should try to "avoid" the VAT.

the Price just says
135000

in another section it talks about it VAT :|

 

[saxondale]

No,
I dont mind paying Stamp Duty.
Its the VAT thing I cant get my head around.

the Price just says
135000

in another section it talks about it VAT :|

VAT is always expressed as "plus VAT" incase the actual % changes during the negotiations, last week it was 17.5% this week it`s 20%

Stamp duty ( another type of added tax) is pretty constant.

 

[ibby]

oh
I might ask them not to charge VAT!
would that work ?

* I am new to all this, Ive got a house and was looking at buying this PUB for the future ie investment.

dont mind me asking stupid questions

 

[Bob]

From this article
It is understood that Customs and Excise have agreed with the Brewing Industry that tenanted public houses with living accommodation be apportioned on an agreed basis of 90% standard rated : 10% exempt.

However, the apportionment could be arguable if it is clearly not appropriate. See HMRC manuals
22.8.6 Buildings used for both commercial and residential purposes
Where a trader has opted to tax a building which consists of both commercial and domestic accommodation, such as a pub or shop with living accommodation above, the option to tax will disapply on the part being used as a dwelling. The trader must apportion the rental income/sale proceeds between the standard rated commercial element and the residential element. The residential part will generally be exempt, unless it qualifies as the first grant of a major interest in a new dwelling which will be zero rated.

 

[Bob]

I might ask them not to charge VAT!
would that work ?

In a word - no

 

[crossdaz]

In a word - no

Or you could figure out what the vat is and just reduce your offer accordingly?

Get professional advice mate - the sort that's covered by professional indemnity insurance

 

[Drpepper]

If you are going to be using the bottom as a shop I would presume you will be taking more than £70k a year. Simply register the business for VAT now and claim it back.

If you are just going to be letting the shop and have no other business then simply pay the VAT, it's part of the cost and if you can't afford it move on.

 

[lockyer]

Even if you were renting it out, you could claim the vat back as long as you were billing the rent out at "plus vat", which is normal.

You don't have to charge vat on to the residential tennants as that is zero rated if I remember correctly.

This would also allow you to claim back any vat on the refurb etc.