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Readers' forum : VAT accounting

03 October 2017
Issue: 4618 / Categories: Forum & Feedback

Option to tax on the sale of a commercial property after deregistration.

I have taken on a new client who bought a commercial property in 1995 and apparently made an option to tax election on it immediately to claim input tax on repair and improvement costs. He wasn’t charged VAT on the purchase price because the seller had not opted to do so. The property was rented out by my client from 1995 to 2016. The problem is that my client deregistered from VAT on 9 June 2015 because the rental income was less than the deregistration threshold. He did not account for output tax on the market value of the property on his final VAT return because no input tax had been claimed when it was bought. But on 30 November 2016 he sold the property to the tenant in occupation for £150 000.

The tenant is not VAT-registered because he has mainly exempt income. HMRC has picked up the property sale and...

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