VAT when transferring small office to an LLP?

VAT when transferring small office to an LLP?

11:31 AM, 10th June 2021, About 3 years ago 1

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I am considering transferring a small office investment into a family LLP. The property has been opted for VAT. The property was bought with vacant possession recently and has remained vacant, this would eliminate a Transfer a business as a going concern option.

So my question is: If I transfer the property to an LLP free of charge – where I would be a member – would there be any VAT implications?

Any feedback greatly appreciated


Editor’s Note:

From HMRC >>

The effect an option to tax has

Supplies of land and buildings, such as freehold sales, leasing or renting, are normally exempt from VAT. This means that no VAT is payable, but the person making the supply cannot normally recover any of the VAT incurred on their own expenses.

But you can opt to tax land. For the purposes of VAT, the term ‘land’ includes any buildings or structures permanently affixed to it. You do not need to own the land in order to opt to tax. Once you have opted to tax all the supplies you make of your interest in the land or buildings will normally be standard-rated, and you will normally be able to recover any VAT you incur in making those supplies.

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Ian Narbeth

16:59 PM, 14th June 2021, About 3 years ago

Unless the VAT is to be lost, the LLP must register for VAT and opt to tax the property and give notice of that option to tax to HMRC.
The TOGC rules mean that the VAT does not have to be paid and recovered and any SDLT is calculated on the VAT-exclusive premium (so the buyer doesn't pay SDLT on the VAT). However, in order to come within the TOGC rules the LLP would have to opt to tax meaning that on any letting VAT will be chargeable on the rent.
As the transfer is between connected parties, you should be able to arrange it so that the LLP recovers the VAT at the same time as or just before you have to pay VAT to HMRC.

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