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bigduckontax, Accountant
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I want to sell my lease on a lock up garage in London ,000 A

Customer Question

I want to sell my lease on a lock up garage in London for 105,000
A friend told me that is I sell for more than £82,000 I have to charge the buyer VAT as the sale of my garage is not part of another property transactions and the inland revenue regards ***** ***** selling a parking space.
I have two questions:
- Is this true ?
- can you point me to a .gov web site that explains the situation?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to be able to help you with your question. You can read all about this matter in Gov UK guidance notes here: https://www.gov.uk/government/publications/vat-notice-742-land-and-property/vat-notice-742-land-and-property However, that will, I suspect, merely get you more confused. VAT has never been a matter for the Inland Revenue (IR), it was originally given to HM Customs and Excise to operate before that department was combined with the IR to form HMRC. Parking areas are a Tom Tiddler's Ground for VAT and compliance. However, in your case the transaction is exempt from VAT as it is a leasehold estate in land: 'A building is new for 3 years from the date that it is completed. The date of completion is the date the certificate of practical completion is issued, or the date the building is fully occupied, whichever happens first. All freehold sales that take place within the 3-year period are standard-rated. However, leasehold sales are exempt ' So there you are; an exempt supply. You only have to register for VAT if your aggregated standard, reduced or zero rated sales breach the turnover threshold of 82K; exempt supplies don't count. Don't forget that the gain made on this sale will be subject to Capital Gains Tax, but you do have an Annual Exempt Amount of 11.1K to offset this. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.


Thank you for your prompt reply

Are you sure you have got this right - my friend seemed certain. I note in the reference you gave me it had the clauses below - which although it does not specifically talk about selling a leasehold it does talk about the difference between providing a garage with and without (as is my case another property)

If you read - 'granting the right to use a facility' as selling a leasehold - I think I would have to charge VAT - what is your view - Thanks

"4.2 When do I make a standard-rated supply of parking facilities?

If you make a grant of the right to use facilities which are either designed for parking vehicles or provided specifically for that purpose your supply is standard-rated except in the circumstances described in paragraphs 4.4 and 4.5. The following are examples of standard-rated supplies of parking facilities:

- a letting or licence of a garage or designated parking bay or space"

Expert:  bigduckontax replied 1 year ago.

With respect you are getting confused. You are selling a lesehold interest in land. Such transactions are exempt from VAT.

By selling a leasehold interest you are not 'letting or licence of a garage or designated parking bay or space;' you are selling a leashold interest, an entirely different kettle of fish. The Gov UK guidance is quite positive; leasehold estates in land of this type are exempt supplies.

I know that UK taxation can be a trifle crazy, but the idea of people having to register for VAT when they sell their garages and then deregister immediately thereafter is in the realms of Alice in Wonderland!

Please be so kind as to rate me before you leve the Just Answer site.

Customer: replied 1 year ago.

Thank you for your reply.

Unfortunately taking to my friend again I am still not sure you have got this right.

I will speak to a lawyer tomorrow and pass on if he agrees with you or not - I will do this before 5:00pm tomorrow.

regards

John

Expert:  bigduckontax replied 1 year ago.
OK, John, I will await his comments.
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Category: Tax
Satisfied Customers: 3105
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 1 year ago.

Hi - I have decided you pay your bill as you showing me the reference document which I could not find was of value to me.

But two separate lawyers have now confirmed to me that there is an anomaly with selling leases on private lock up garages over £82,000 that are not being sold with dwelling. The Partner of one a city law firm will be sending me the details today.

Regards

John

Expert:  bigduckontax replied 1 year ago.

Thank you for your support.

I still hold to my view that individuals having to register for VAT to sell a garage and then immeditely deregister is simply ludicrous.

Customer: replied 1 year ago.

It actually all shown in the document you gave me.

It only becomes an issue, in my circumstances, if you are selling a leasehold garage, over £82,000 and it is not being sold with a nearby dwelling. ref Section 4.4.1

So you don't need to register for VAT etc for most transactions ....

But never mind... Thanks - document was useful

Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance.

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