VAT on a commercial property's purchase price - cashflow problems

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    VAT on a commercial property's purchase price - cashflow problems

    I've bought a couple of commercial properties to develop in the past but (unusually, although very helpfully for me) in each case the seller was either not VAT-registered or had not opted to VAT the property.

    I am now seriously looking at a commercial property where the seller has opted to VAT. TOGC is not an option as it is occupied by a subsidiary company of the company which is selling it, which'll shut up shop upon completion of the sale to me (although do tell me if I might be misunderstanding the TOGC rules). As such it looks like I'll be forced to pay the VAT.

    I understand that if I VAT-register my company and then opt to VAT the property myself I will be able to claim back the VAT paid at some point in the future. However I am worried about the cashflow implications. I would be buying with bridging finance at a 25% deposit, so with an additional 20% VAT on top of the purchase price (I assume any lender's valuation against which a loan-to-value was calculated would exclude VAT) that is a significant chunk of extra money I'd have to find. Is there any way around this?

    (I will be speaking to my accountant about this in due course, but I always find the views of experienced LLZ posters enormously to get my thinking started!)

    From my understanding, yes what you say is correct. It does mean you have to find an additional 20% up front, plus SDLT is due on the VAT-inclusive amount so it increases that as well.
    There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.


      doobrey, thank you for your reply. As you say I don't think there's any workaround, but if anyone knows of anything that'd be very helpful. The (albeit reclaimable) VAT element means that, given I hope to buy with a 75% LTV bridging loan, I have to go from finding a 25% deposit to finding a 45% deposit, which makes the purchase rather trickier.


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