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11 February 2014
Issue: 4439 / Categories: Forum & Feedback , VAT

An office building is being converted into student accommodation. However, the present owner has opted to tax the building so that VAT will theoretically be payable

My client is a developer who is buying an office building for conversion into student accommodation. The current owner has opted to tax. The client proposes to exchange contracts in February 2014 with no consideration passing at that time for completion in May 2014.

A special purpose vehicle (SPV) company will be incorporated and VAT-registered between February and May and will receive the transfer of the property on completion.

There is a sitting tenant occupying one-sixth of the property and the lease expires in November 2014. The SPV will receive rent for those six months and will commence conversion work on the remainder of the building.

The intention is that the work will be completed in early 2015 whereupon the SPV will make a zero-rated sale to a purchaser which will issue a certificate of intended relevant residential property (RRP) use.

I believe the purchase can...

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