VAT on commercial property purchase

[kandc]

Hi all, first post.

Very quick summary: I'm looking for a way to minimise (or avoid if possible) being out of pocket a large chunk of VAT for the period between buying a property and reclaiming the VAT through the subsequent VAT return.

More detail: I am looking to buy a commercial investment property through an existing limited company. The property I want to buy is elected for VAT so I understand VAT is applied to the purchase price. The company I'm buying it through is registered for VAT (as it owns another investment property which is also VAT-elected). However paying the VAT on completion of the purchase and waiting for it to be refunded to the company through the next VAT return is going to leave it/me very strapped for cash. I know it's just an issue of timing (and the extra bit of stamp duty which is calculated on the inc VAT price) but if there was any way to get around this I would love to hear it.

Are there lenders who specialise in lending VAT amounts secured on VAT paid back by HMRC? Perhaps I could make completion simultaneous with a VAT quarter (that makes the period I'm on the hook for quite short but vendor would have to delay a bit)? Could I just call HMRC and ask them to defer it somehow or would they laugh me out of town?

Really appreciate any help or guidance!

 

[UK Contractor Accountant]

Yes there are specific lenders who deal in bridging finance for VAT on commercial property purchases. Secured or unsecured lending?

 

[kandc]

Ah - I had searched before posting but the key word I missed was 'bridging' as you suggested - that's thrown up a few leads to investigate, thanks. I guess I could grant security on the existing property (it's not mortgaged)

Shame HMRC doesn't offer such a service for a fee

 

[UK Contractor Accountant]

Don't forget you will need to opt to tax otherwise you can not claim the vat back -your Solicitor should advise you on this issue.

Once opted to tax all rents and sale of the building will be subject to VAT.

Some people try to use the TOGC (transfer of going concern) rules to avoid paying the vat on sale.

 

[PaulThompson]

I was going to suggest the TOGC route, sounds like it could be an option to discuss with your accountant, otherwise just work with a lender who will lend the VAT, we have various options available depending on what the long term finance on the property will look like.

 

[KM-Tiger]

Ah - I had searched before posting but the key word I missed was 'bridging' as you suggested - that's thrown up a few leads to investigate, thanks. I guess I could grant security on the existing property (it's not mortgaged)

Shame HMRC doesn't offer such a service for a fee

Might be worth trying your bank. It was a while ago but that's what I did.

It was secured by getting our solicitor to draw up a charge over the property we were purchasing. All signed, but it was not filed. When we got the refund our solicitor tore it up.

IIRC the bank took a (not unreasonable) fixed fee.

 

[kandc]

Great, thanks all for the suggestions. I'll look into these

 

[Claire Dymond]

Make sure your solicitor obtains proof of the 'option to tax' from the seller, mine didn't and it caused a lot of hassle. I found that accountants, solicitors and even the HMRC don't understand 'option to tax'. You're on your own.