Thanks Jonathan. I was working for these people when Mum became ill.
They were very kind and checked (as far as they could, as far as anyone
can) the IHT planning and I am happy we had the best advice. A couple of
days ago I said:
Choosing a solicitor (or an accountant) is like ordering a tiger for
your zoo. You want one that snarls and hisses and prowls and attacks
and has sharp teeth. You don't want a meek tiger who says (Nogood
Boyo style) "The rules say we've lost so we've lost".
Heres your tiger if you need an accountant
Christopher Harden Ltd
122A Nelson Road
020 8893 3399
Posted via Mailgate.ORG Server - http://www.Mailgate.ORG
The transfer of a business as a going concern is not exempt, it is
deemed not to be a supply - see the VAT (Special Provisions) Order
1992, Article 5. If it was exempt there'd be no input tax recovery on
the associated costs, but we know that it's allowed and there have
been court cases which have confirmed this.
True! In this case, however, there are other things that the CA needs
to take into consideration. He shouldn't have just said it was a bad
idea because of potential future difficulties that he foresaw. If the
property were sold to a housing association any option to tax could
have been disapplied under the legislation. The CA's answer should
have been along the lines of I can foresee potential difficulties, but
we need to investigate the detail. That way he has excellent reasons
for knocking the idea on the head while still earning a fat fee for
for help with VAT visit www.vatark.co.uk
That went rather well I think, presumably we all fell into the same
trap (Peter excepted). That CA would have held you in the same
barely-disguised contempt he held me. Call yourself VAT experts? You
don't even consider the long-term repercussions of opting to tax?
Nogood you think "Black" is unambiguous, you would be amazed how many
people think Black is very dark Blue, Red or Green. Having established
long ago that 89 percent Blue is to all intents and purposes "Black",
they are now merrily treating 62 percent Red as "Black" under the
benign and approving eyes of the VAT man. Meanwhile you struggle along
under your self-imposed restraints.
It's called experience, you can't learn it you can only experience it.
We've gained a bit of experience here and next time we hear a sentence
that starts: "I'm thinking of renting out "
the alarm bells will go off. We'll be thinking:
" renting out? I don't like the sound of that! Have we considered
calling it something else?"
Listening to that nonsense, one'd think renting was soon universally
to become a thing of the past. How about if we just abolish rents and
just let people do what they like on our land, and, provided they keep
feeding us off-the-record bribes, we just informally permit them to stay?
For VAT purposes, bribes are zero-rated.
Your are right, it *shouldnt* but it is. Once you have elected to charge
VAT, then you will have to charge VAT on the sale BUT the vat payment
may be able to be avoided if the purchaser can show that it will result
in an almost immediate reclaim. As you would expect, there are some
conditions to fulfil, of course.
How does that work? If you buy a piece of land, for say £1M plus VAT
and you are going to recover the VAT on it, how do you avoid paying
the VAT to the vendor and waiting up to four months to get it back?
Can we step back a bit, please?
The original question was "If I rent part of my forecourt to Arthur
Daley, should I charge him VAT?", and I wrongly assumed the answer
would be "of course not, because there is no VAT on rent".
Now, it seems to me I wasn't really all that wrong at all, because you
folks say you *can* charge VAT on rent, but to do so you'd need to
exercise an option. Leaving aside the future ramifications issue, this
means that unless you exercise the option, then you would not charge VAT,
so that is therefore the default position. Hence the short answer "No,
don't charge VAT" is not wrong.
What I'd like to know is:
Question 1: Under what circumstances would it be sensible to exercise
the exemption waiver option? On the face of it, it would seem utterly
daft to do so, since if I want to charge a given net rent, and don't
charge VAT, then that given rent is what Arthur will pay, whether or not
he's registered. If I do charge him VAT on said given rent, I will get
the same as otherwise, and he will pay the same as otherwise if he's
registered, but more if not. Who stands to gain here by (apparently)
needlessly bringing VAT into an otherwise simple scenario?
Question 2: If we accept that charging VAT is a bad idea in our example,
why does Troy say it would be better to disguise the rent as commission?
I can only see that it might be because commission is not exempt, but if
we're proposing not to charge VAT anyway, then renting would be the way
to go, since presumably if charging commission we'd *have to* charge VAT
(but doing so would have no waiver implications). But then we're back
to question 1, i.e. why would charging VAT be a good idea?
The answer is much the same as for the question "I'm below the registration
threshold, should I voluntarily register?"
If you opt to tax the rental income, then you can claim the VAT on the
expenses associated with it, and also the VAT on the proportion of the
general overheads for the whole business apportioned to the rental income
(ie you don't have partial exemption to worry about).
If the tenant is VAT registered (eg a car dealer), then they can claim the
VAT you charge back, so you can pass the full cost of the VAT on to them.
If they are not registered, for example an insurance company or a dentist,
then you wouldn't want to opt to tax because you would have to bear the
full cost of the VAT charged on the rent.
By calling it something else, we can charge this customer VAT, and claim VAT
on expenses, while still keeping our options open for the future.
OK, that makes sense, but it seems a bit theoretical in the pejorative
sense of the word, i.e. it doesn't seem likely in practice. If I have
a garage which is ticking over nicely, then it doesn't seem likely that
there would be a lot of expenses associated with renting a bit of spare
ground. Neither would there be likely to be a lot of general overheads
unclaimed already. Would there? Might be different if the business is
going down the tubes, but in that case de-registration might be on the
Isn't "calling it something else" fraud? A rose by any other name
and all that.
Oh rent, rent, wherefore art thou rent?
'Tis but thy name that is my enemy!
No, because their fed up with being underpaid and abused by the Inland
Revenue. they figure they might as well go into private practice, earn a
decent fee and still be unappreciated by the Inland Revenue.
On Sat, 20 Nov 2004 12:22:09 +0000 (UTC), "Troy Steadman"
This is interesting, you have the choice of charging or not charging
VAT but there are various considerations before deciding.
It is also more than just a tax issue because it would also be
possible to charge rent, commission or a mixture.
Maybe the offer would lead to a further consideration for alternative
uses for the land.
An accountant should consider everything not just the question asked.
As Troy says there is no right answer it all depends on the
Peter Saxton from London
Hmm, not seen the full thread, but there are questions, so I'll give my
best shot. What do you think?
Yeah, that's true.
Deal with the VAT first. Either the garage sells cars, or maintains
them. Either way, it is a taxable supply made by a taxable person. So,
VAT is probably an issue. Partial exemption certainly is.
If the property was "opted-to-tax", then a) poor garage!; b) VAT must be
charged, because the rent would be, in effect, a taxable supply. If the
property was no "opted-to-tax", then rent is an exempt supply, so no VAT
But, hold on a minute, we don't make business decisions based purely
upon their tax implications! (if we did, the Revenue would be
prosecuting us for tax evasion all the time!) (HMC&E already have, just
ask Halifax Building Society!)
This mush who wants to sell cars.... is he competition? Is he a
potential business partner? Will he threaten your 10-year plan? Will
he enhance your 10-year plan (or even make it happen, something business
leaders like to see once in a while, certainly their banks do).
If he's not competition, perhaps he's complementary to your maintenance
services. Hmm.... who's got the greatest margin? Y'know, give him a
few years, he might be prepared to buy you out of your business and take
the lease off your hands..... nice retirement present.
OK, let's assume that he is complementary and is a probable business
But, let's check. Criminal record? CCJs? Insolvent companies?
Connections to the mafia?
OK, cleared those checks, let's haggle about rent. I'll start at the
higher of the market's square-footage rate, or a portion of my gross
margin pro rata floorspace. Plus a 20% markup, don't want to be ripped
off now, do I?
Quality, he's signed up for it! Perhaps I should go into the property
The word "rent" is in the question and that is why we have all
included it in the answer. If you look at a garage forecourt you don't
see delimited areas and think to yourself "I wonder who's renting that
bit over by the MOT bay?"
So if someone asks you, "I've got this bloke wants to sell cars off my
forecourt", you don't instinctively say, "Why don't you rent him that
bit over by the MOT bay?" you say "Why don't you charge him
commission" 10% of turnover between £100K and £200K rounded to the
nearest £10K or whatever fits the bill.
So the answer is:
"Defer the (potentially) crucial decision as to whether to opt to tax
or not until a later date by simply calling it what it is
And yes of course it's VAT-able"
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