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VAT of £32k saved on property transaction

Local businessmen were considering a joint venture for the acquisition of a commercial property. Given the amount of VAT at stake (i.e. £32k), the client’s accountant recommended that we were engaged to provide the necessary VAT advice.

After considering the potential options, a new joint venture company was set up and we guided the new company through the process of registering for VAT and opting to tax its interest in the property to ensure that the VAT on the acquisition was recoverable.

Without taking our advice, the company would have incurred an irrecoverable VAT cost of c. £32k.

 

Review of proposed property transaction assists charity to fully consider its VAT position

The charity was not registered for VAT and was looking to acquire a property that would result in an additional VAT cost of c. £80k.

We undertook an income-based review and although the charity’s intention was to make taxable rental income (i.e. opted lease of its new property), the level of taxable activities were below the compulsory threshold for VAT registration.

The charity could register for VAT on a voluntary basis but this was still not beneficial to the charity as it would only provide a VAT recovery benefit of c. £2k of the £80k VAT cost when taking into account the necessary non-business apportionment and a partial exemption calculation.

Although this was not the financial result the charity was hoping for, our exercise assisted the charity in the “pros” and “cons” of voluntary VAT registration and, in this case, the administration burden of the VAT return calculations was much greater than any VAT recovery benefit.