There are circumstances where this VAT charge can be overturned – a 20% saving and of course a corresponding SDLT reduction. This cannot be retrospectively applied and if VAT is proven to be incorrectly charged post completion – HMRC are unlikely to permit Input Tax Reclaim.
Even if you are an organisation that can reclaim VAT, input tax recovery is on a property by property basis. Whilst VAT reclaim may be permitted, the cost to finance the VAT between completion and your next VAT return is an additional cost that erodes yield. The additional SDLT cannot however be reclaimed…
We can advise on whether the vendor is applying VAT correctly, whether the Option can be overturned and the formalities HMRC require to do so. Solicitors are not always VAT experts and may not be aware of the nuances for your particular purchase (ex public houses are prime candidates for incorrect VAT treatment).
A ‘transfer of an ongoing concern’ [TOGC] is another way in which VAT on a purchase can be mitigated. The timing and structure of the deal is paramount and needs to be corroborated by contracts, inventories and your recorded intentions.