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Readers' forum : Development discount

19 July 2016
Issue: 4559 / Categories: Forum & Feedback

Can a purchaser claim input tax when paying a seller’s estate agent fees?

A client is buying some land. He is a property developer and intends to develop the land and construct residential dwellings. As I understand it the land purchase will be exempt from VAT unless the seller has opted to tax which we believe is not the case. Can readers advise on whether this is correct?

As part of the deal the seller has asked whether the estate agent who has arranged the sale can invoice my client instead of the seller. My client will pay the estate agent and the purchase price of the land will be discounted by the value of the fee (excluding VAT). Is there a problem with this arrangement?

Presumably my client can claim input tax on the agent fees because the homes will be sold after the development is complete thereby generating taxable (zero-rated) sales?

I look forward to replies...

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