Sold VAT opted property and omitted to charge VAT

[Anonymous]

Hi,

HMRC have investigated a transaction where the Seller company had opted to charge VAT but innocently neglected to tell its advisors – sale went through with no VAT being charged on the Price. HMRC are now looking for a VAT payment. Purchaser was registered for VAT but had not opted to tax the property. The VAT bill could potentially be £250k – albeit the Purchaser would claim VAT back. Do you think there is any chance HMRC would grant a concession in these circumstances?

craigmar

[Marie Stein]

Hi Craigmar

It’s always difficult to comment on property issues without knowing the full facts of the case but if the transaction was liable to VAT (as opposed to being say a transfer of a going concern, which would be free from VAT) then I would say it’s very unlikely that HMRC would grant any sort of concession that would prevent the vendor from charging the VAT.

I have come across a few very limited examples in over 30 years of VAT when HMRC have agreed not to pursue a VAT liability but they have only been in very exceptional cases. I can’t see it happening in this sort of situation, but there is no harm in asking.

The vendor may have forgotten to advise his solicitors that the property was “opted”, but I am surprised that the professionals involved didn’t ask the question or that the issue wasn’t covered in the sales contract. The option to tax has been around for over 20 years now and I never see a property sale contract without a clause dealing with the issue.

Sorry I can’t be more helpful on this one.
Marie
18 August 2011

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