Stephen Morris, Partner, Acuity Essentials of Property Taxation - Acuity Legal and Kilsby Williams 18th September 2014

VAT/TOGC VAT and Transfer of a Going Concern – Property Rental Businesses

VAT/TOGC Freehold sale of commercial building less than 3 years old or not completed – standard-rated Sale or grant of lease of commercial building 3 years old or more – exempt subject to option to tax If Transfer of Going Concern, VAT not charged

VAT Property Rental Business Buyer to be VAT registered if Seller is taxable person and if standard rated supply, Buyer must elect to waive, notify HMRC and not revoke Rental Business to be in place before and to continue for period after the sale HMRC Notice 700/9 and HMRC Briefings 30/12 and 27/14

VAT/TOGC Some common questions around “Property Rental Businesses” and whether TOGC is available

TOGC Occupational Tenant is only holding an agreement for lease and has not yet completed a lease –Dartford Borough Council v Revenue & Customs (2007) –Notice 700/9

Members of the same VAT Group Paragraph 4 of Notice 700/9 Transfer to same VAT group member is disregarded for VAT purposes If seller or purchaser is same VAT group as the tenant, no TOGC If seller or purchaser is same VAT group as one tenant but there are other tenants, may be TOGC VAT/TOGC

Partly let properties Paragraph 6.2 of Notice 700/9

VAT/TOGC Lease is granted subject to occupational leases rather an interest transferred –Robinson Family v HRMC (2012) –Substance is important –HMRC Briefs 30/12 and 27/14

VAT/TOGC Lease surrenders Notice 700/9 revised this year – Brief 27/14 effective from 9 July 2014

Stamp Duty Land Tax (“SDLT”) Its application in overage agreements, lease variations and option agreements

SDLT Overage agreements Estimate unascertained or uncertain consideration and then reconcile – Sections 51 and 80 Finance Act 2003 If not paid for 6 months, apply to Birmingham Stamp Office for deferment of payment – Section 90 Finance Act 2003.

SDLT –Identity of purchaser –Location of land –Nature of the uncertain payment –Amount of consideration for which deferment is sought and SDLT that would be paid –Details of when it will be paid If application accepted, additional SDLT payable 30 days from date consideration ascertained or ceases to be contingent

SDLT Lease variations – impacts on SDLT Rent variations Deemed surrender and re-grants

SDLT Rent variations –Within first five years of term –Review over five years – abnormal increases before 17 July 2013

SDLT Deemed surrenders and re-grants Term of lease extended Additional property added to demise Overlap relief

SDLT Option and pre-emption agreements Acquisition of the right itself and exercise are separate land transactions Potentially two notifications Transactions may be seen as linked

Any Questions ??