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!)

    #2
    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.

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      #3
      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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