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Hi Alan
We have a client who purchased a section 23 holiday home in 2006. To date our client has not used section 23 allowances due to rental losses.
1.If the client now sells the property can the new purchaser claim the capital allowances?
Revenue�€�s leaflet on section 23 states that if a property is purchased within the 10 year period and the property is still a qualifying property the section 23 relief will be available to the new purchaser. However this Revenue leaflet has not been updated since 2010.
2.Back in 2006 our client leased the property to a management company under a long lease using the VAT 4A system. If the lease is assigned to the new purchaser (who is vat registered) can you confirm that the clawback would not arise on the vat as the purchaser would be stepping into the shoes of our client.

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Posted by (Questions: 21, Answers: 0)
Asked on 21 January 2014 6:06 pm
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1. Section 23 is a deduction against rental income, not a capital allowance. The deduction is claimed in the first year of letting, usually giving rise to a rental loss which can be carried forward against future rental income.
If sold within 10 years, the deduction is clawed back from the claimant and given to the purchaser.
2. The situation you refer to, a surrender of a lease, requires the surrenderee to account for the VAT. As the property is not residential, it will not be possible for the surrenderee to opt to tax the lease (charge VAT on the lease) as the post 1 July 2008 VAT regime does not allow charging of VAT on residential property. So the surrenderee is caught.

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Posted by (Questions: 5, Answers: 4741)
Answered on 27 January 2014 11:04 am