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bigduckontax
bigduckontax, Accountant
Category: Tax
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We brought some land which from the Council which we wasn't

Resolved Question:

We brought some land which from the Council which we wasn't charged VAT, we are going to sell the land on again, we are registered for VAT and have reclaimed the vat on professional fees for services to get a residential planning consent, does this mean we now need to charge VAT when we sell?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You can opt to charge VAT on the sale, but unless you have a commercial buyer registered for the tax the prospective purchaser is likely to jib at the extra 20%! I would suggest that the option is not exercised. I do hope that I have cleared the air for you in this matter.
Customer: replied 1 year ago.
We are not building anything, we brought the land from the Council and we are selling to a commercial company with planning the sell price is £5.3Million and will create £1.06Million in VAT, so if we get it wrong we will be liable for the VAT if we needed to charge it, are you saying even thought we are VAT registered and claimed all the VAT back on the professional fees, we still don't need to charge VAT
Expert:  bigduckontax replied 1 year ago.
All organisations paying professional fees on purchase claim back the VAT as an input. Please advise when you acquired the land and when you propose to sell it.
Customer: replied 1 year ago.
We brought it on 18/06/2015 and we are going to sell with an exchange on 08/04/16 with completion on 31/05/16
Expert:  bigduckontax replied 1 year ago.
HMRC guidance in VAT Notice 742 is that this is a zero rated supply. However, there is a note viz: 'You can opt to tax land (including buildings). Once you have opted to tax any supplies you make of the opted land will normally be standard-rated.' I did mention this option in my original answer. So for this transaction you do charge VAT, but at a rate of zero percent and this should be reflected in the formal invoice for the sale.
Customer: replied 1 year ago.
Apologies I still do not understand and not sure of my way forward.
We purchased the land off the Council and elected not to charge VAT on the acquisition in June 2015 . We are now selling the land on should we elect to charge VAT?
Am I understanding you previous answer correctly in that we do charge VAT and submit an invoice albeit at a ZERO rate??
My concern is that I sell this land without charging VAT and then get penalized for not charging VAT? and indeed also not being able to get back my VAT on the professional fees that I have encountered on per suing this site through planning.
Expert:  bigduckontax replied 1 year ago.
Because the supply of land is zero rated you must issue a VAT invoice charging the tax at 0% unless, of course, you opt to charge VAT which would be at the standard rate. You would not normally do this unless the buyer is registered for the tax and can reclaim it. You will not get penalised for not charging VAT on land sales which are zero tared because you are charging VAT, but at zero percent. I did not invent this Alice Through the Looking Glass situation where you apply VAT, but do not charge anything. As you are making zero rated supplies you are perfectly entitled to recover input taxes incurred with your management of the situation. Some organisations, for example in the passenger transport field make 100% zero rated supplies and because all their expenses fuel etc are standard rated they are even allowed to make monthly as opposed to quarterly returns to ease their cash flow by recovering input taxes.
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Customer: replied 1 year ago.
ThanksThe solicitors are dealing with the sale however on completion do I send them an invoice and keep a copy for our selves.Do we need to fill in any other forms
Expert:  bigduckontax replied 1 year ago.
It is not the solicitor who needs the invoice, but the buyer. You keep a copy to support your own VAT account. Thank you for your support.