My clients (two brothers) inherited a 25% share each in two commercial units in 2016. My clients are not VAT registered.
The property is occupied with tenants. No VAT is charged on the rental income.
I need to establish if there is a VAT implication on the disposal of their individual shares.
I understand that for a supply of property to come within the charge to VAT it must be developed and supplied for consideration in the course of business.
The proposed sale under consideration would in my opinion fall within the broad meaning of ‘business’ in Section 1 VATCA 2010. The property is developed.
Consideration needs to be given to whether the property is ‘new’ as the supply of the property is only taxable while a property is considered ‘new’.
A property is ‘new’ if:-
• It is the first supply of a completed property within 5 years of its completion.
• It is the second or subsequent supply of a previously completed property within 5 years of its completion and if it has not been occupied for 24 months in aggregate.
A property is also a “new” property if it is the supply of a developed, but incomplete property, within 20 years of when the development ceased.
Documents on file from the solicitor tell me that last development was back in 1993/1994.
My conclusion = property is complete (as it is in use) + on basis no development work in the last 5 years it is not a ‘new’ property = exempt supply.