VAT on Property, Finance Act 2008
- CHAPTER 2 VAT ON THE SALE OF A PROPERTY
- 2.1 The Basics
- 2.2 VAT Consequences of an Exempt Sale
- 2.3 Ask the Right Question
- 2.4 Two Preliminary Tasks
- 2.4.1 First preliminary task: find out is there a sale of property for VAT purposes
- 2.4.2 Second preliminary task: find out if the sale is subject to the new rules or the transitional rules
- 2.5 Are you Selling “Undeveloped Land”?
- 2.6 Are you Selling an “Old Property”?
- 2.7 Are you Selling an “Old Building”?
- 2.8 Are you Selling a “Used Second-hand Property”?
- 2.9 Are you Selling a “Used Second-hand Building”?
- 2.10 Shortcut
- 2.11 Partially Completed Buildings
- 2.12 Summary in Diagram Form
- 2.13 Compare and Contrast the Five Exempt Categories
- 2.14 Worked examples of how VAT Applies to the Sale of an Ownership Interest
- 2.15 The option to tax an exempt sale
- 2.15.1 The option
- 2.15.2 Accounting for VAT on an opted sale
- 2.15.3 To opt, or not to opt, that is the question
- 2.15.4 Tax tip, tax saving
- 2.16 Anomaly
- 2.17 Stop
- VAT on the Sale of a Property
- 2.18 The Detail
- 2.18.1 The definition of a freehold equivalent
- 2.18.2 The first definition of freehold equivalent
- 2.18.3 The second definition of freehold equivalent
- 2.18.4 Summary as regards “freehold equivalent”
- 2.19 Anti-avoidance Law on Sale of Undeveloped Land
- 2.20 Completed
- 2.21 Occupied
- 2.22 Development
- 2.22.1 Planning permission
- 2.22.2 Area developed
- 2.22.3 Relevance of whether property is developed or not
- 2.22.4 The Emmen case
- 2.22.5 Revenue’s “Value-Added Tax: Notes for Guidance”
- 2.22.6 Section 639 of the Taxes Consolidation Act 1997
- 2.23 Building
- 2.24 The Amount on which VAT is charged on the Sale of an Ownership Interest
- 2.24.1 The majority of sales
- 2.24.2 Stamp duty
- 2.24.3 Market price
- 2.24.4 The interaction between the market value rules and the Capital Goods Scheme
- 2.25 The Rate at which VAT is Charged on the Sale of an Ownership Interest
- 2.25.1 The majority of sales
- 2.25.2 Composite or multiple supplies
- 2.25.3 What is a composite supply?
- 2.25.4 What is a multiple supply?
- 2.25.5 Apportioning the consideration
- 2.25.6 Composite and Multiple Supplies Case Law
- 2.25.7 Where are we now with Composite and Multiple Supplies?
- 2.26 The VAT Clause in a Contract for the Sale of an Ownership Interest
- 2.27 The country in which the Sale of an Ownership Interest is Charged to VAT – the Place of Supply Rule
- 2.28 Goods Installed or Assembled
- 2.29 The time when the Charge to VAT on the Sale of an Ownership Interest Arises – The Triggering Event
- 2.29.1 On completion of the contract
- 2.29.2 The tax point when the supply of the ownership interest is the supply of rights
- 2.29.3 Payment received in advance
- 2.30 The VAT Invoicing Requirements on the Sale of an Ownership Interest
- 2.30.1 Governing legislation
- 2.30.2 Requirement to issue an invoice
- 2.30.3 What should be on a VAT invoice
- 2.30.4 Time limit for issuing the Invoice
- 2.31 For How Long do you Have to Hold on to VAT Records?
- 2.32 The Appropriate Return for VAT on the Sale of an Ownership Interest
- 2.33 The date on which VAT on the Sale of an Ownership Interest is Payable
- 2.34 Special Instances on which a VAT Charge arises on the Sale of an Ownership Interest
- 2.35 Sale of a Private Residence
- 2.36 The Self-supply of an Ownership Interest
- 2.37 Transfer to Private Use
- 2.38 Gifts
- 2.39 The “sale” of an ownership interest by compulsory purchase or by seizure
- 2.40 The sale of an ownership interest within a VAT group
- 2.41 Special Instances where a VAT Charge does not arise on the Sale of an Ownership Interest
- 2.42 Miscellaneous Point on Ownership Interests
- 2.42.1 The forfeiture of the deposit on failure to complete
- 2.42.2 The deposit received by a vendor
- 2.42.3 Deposit received by stakeholder
- 2.43 The Mortgage and Repossession of an Ownership Interest
- 2.44 Options to Buy Land
- 2.44.1 Options where the option price is less than 50% of the value of the land
- 2.44.2 Options where the option price is more than 50% of the market value of the property
- 2.45 Sale of a Private Asset by a Registered Person
- CHAPTER 3 LETTINGS
- PART I – THE VAT TREATMENT OF LETTINGS
- 3.2 An Overview of the VAT Treatment of Lettings
- 3.3 The Two Step Approach
- 3.4 A more Detailed Look at Step 1 – Determining the Correct VAT Treatment to be Applied to a Letting
- 3.5 A more Detailed Look at Step 2 – Applying the Correct VAT Treatment to the Letting
- 3.5.1 Applying the standard rules
- 3.5.2 Applying the transitional rules
- 3.5.3 Applying the waiver of exemption
- 3.6 Remember the Capital Goods Scheme Implications of Granting a Letting
- 3.7 Summary
- PART II – A MORE DETAILED LOOK AT LETTINGS
- 3.8 The Exemption for Lettings
- 3.9 The Option to Tax
- 3.9.1 How do you opt to tax?
- 3.9.2 Remember the VAT clause!
- 3.9.3 Is including a VAT clause sufficient to exercise the option?
- 3.9.4 When can you exercise an option?
- 3.9.5 Can you backdate an option?
- 3.9.6 The deemed option to tax
- 3.9.7 When can you not exercise an option to tax?
- 3.9.8 The option to tax can be exercised if the connected tenant/occupant is entitled to recover at least 90% of the VAT charged on the rent
- 3.9.9 What does “Connected” mean
- 3.9.10 Terminating the option to tax
- 3.9.11 The termination of the option to tax because the landlord becomes connected to the tenant
- 3.9.12 Termination because the landlord becomes connected to the person who occupies the property and the revenue concession
- 3.9.13 What happens when a tenant/occupant falls below the 90% VAT threshold after a lease has commenced?
- 3.9.14 The option to tax can apply at a later date if the tenant’s/occupant’s VAT recovery on the rent increases to 90% or more
- 3.9.15 Why use 90% as the VAT recovery threshold?
- 3.9.16 How do I know how much VAT I can recover on the rent?
- 3.9.17 Remember it’s what you use the building for that matters
- 3.9.18 Warning – these connected party provisions have a very wide application
- 3.9.19 The option to tax covers all of the consideration the landlord receives for the letting
- 3.10 The Waiver of Exemption
- 3.10.1 Introduction
- 3.10.2 So what is a waiver?
- 3.10.3 There was a choice
- 3.10.4 No new waivers after 1 July 2008
- 3.10.5 However existing waivers continue
- 3.10.6 Are waivers still restricted to lettings of less than ten years?
- 3.10.7 The impact of a waiver of exemption
- 3.10.8 The differences between the waiver of exemption and the option to tax
- 3.10.9 Cancelling a waiver of exemption
- 3.10.10 The automatic termination of the waiver on lettings between connected persons
- 3.10.11 Letting a property after cancelling your waiver of exemption
- 3.10.12 Sale of a property after the cancellation of a waiver
- 3.10.13 The implications of making a taxable sale after cancelling a waiver of exemption
- 3.10.14 The implications of making an exempt sale after cancelling a waiver of exemption
- 3.10.15 The waiver of exemption and residential lettings
- 3.11 Premiums on the grant of a Lease
- 3.12 Reverse Premiums
- 3.13 Assignments
- 3.13.1 Assignments pre 1 July 2008
- 3.13.2 Assignments post 1 July 2008 – not transitional interests
- 3.13.3 Assignments post 1 July 2008 – transitional interests
- 3.13.4 Payment by the assignor to the assignee
- 3.13.5 Payment by the assignee to the assignor
- 3.14 Surrenders
- 3.14.1 VAT treatment of a surrender before 1 July 2008
- 3.14.2 VAT treatment of a surrender after 1 July 2008
- 3.14.3 Assignments post 1 July 2008 – transitional interests
- 3.14.4 What if payment is made for the surrender?
- 3.14.5 Payment by the landlord to the tenant
- 3.14.6 Payment by the tenant to the landlord
- 3.14.7 Break clauses and surrenders
- 3.15 Leases Within a VAT Group
- 3.16 Election to Register for VAT – Holiday Homes
- CHAPTER 4 THE CAPITAL GOODS SCHEME (CGS)
- PART II – A DETAILED LOOK AT THE CGS – THE TERMS AND FORMULA
- 4.5 When does the CGS Apply?
- 4.6 What is a Capital Good?
- 4.7 Applying the CGS
- 4.8 The Four Calculations that Underpin the CGS
- 4.9 When does the Adjustment Period Start?
- 4.10 How do you Account for the Adjustment?
- 4.11 A Glossary of Terms
- 4.12 A Worked Example of a Capital Goods Scheme
- 4.12.1 Step 1 – Recovering the VAT paid
- 4.12.2 The second step – working out the “Total reviewed deductible amount”
- 4.12.3 Step 3 – The first adjustment
- 4.12.4 Step 4 – The Second Interval Adjustment
- 4.12.5 Step 5 – The Third Interval Adjustment
- 4.12.6 Step 6 – The Fourth Interval Adjustment
- 4.12.7 Step 7 – The Remaining Intervals
- 4.12.8 The Capital Good Scheme Record for the Bank of Seb
- 4.12.9 The amount of VAT recovered – Check
- 4.12.10 Summary
- PART III – OTHER CALCULATIONS UNDER THE CGS
- 4.13 What Happens if a Capital Good is not used During the Initial Interval?
- 4.14 What Happens if a Capital Good is not used in the Second or a Subsequent Interval?
- 4.15 Why is the Initial Interval Set at the First 12 Months of Use?
- 4.16 Calculating the Interval Adjustment and the Annual Adjustment
- 4.17 Selling the Property During the CGS Period
- 4.17.1 The impact of making a taxable sale
- 4.17.2 The purchaser’s position
- 4.17.3 The impact of making an exempt sale
- 4.17.4 The purchaser’s position
- 4.17.5 The interaction between the CGS and the Option to Tax a Sale
- 4.17.6 Sale of part of a capital good
- 4.18 A Significant Change in Taxable Use of the Capital Good – “The Big Swing”
- 4.19 The CGS Implications of Cancelling an Option to Tax
- 4.20 The CGS Implications of Opting to Tax
- 4.21 Some Points on the CGS and Transfer of Business Relief
- 4.22 The CGS Implications of a Sale Between Connected Persons
- 4.22.1 The VAT status of the adjustment amount
- 4.22.2 The interaction of the connected party provisions with the market value provisions
- 4.23 Refurbishments Carried Out by a Tenant
- 4.24 Destroyed Capital Goods
- 4.25 The Impact of Changing the Year End During the Adjustment Period
- 4.26 The Capital Goods Record
- CHAPTER 5 THE TRANSITIONAL MEASURES
- PART I – THE 4 TRANSITIONAL TRANSACTIONS
- 5.2 Understanding When you need to Apply the Transitional Rules
- 5.3 The 4 Transitional Transactions – “The 4 TTs”
- 5.4 The 4TT Checklist
- 5.4.1 The First Transitional Transaction – The Transitional Sale
- 5.4.2 The Second Transitional Transaction – The Transitional Letting
- 5.4.3 The Third Transitional Transaction – The Taxable Transitional Assignment/Surrender
- 5.4.4 The Fourth Transitional Transaction – The Exempt Transitional Assignment /Surrender
- 5.5 A more Detailed Look at the Transitional Transactions
- 5.6 What is a Transitional Interest?
- 5.6.1 The first definition – freeholds and freehold equivalents
- 5.6.2 The second definition – Legacy Leases
- 5.6.3 The first and second definitions are not related
- 5.7 The First Transitional Transaction – Transitional Sales
- 5.8 The Second Transitional Transaction – Transitional Lettings
- 5.8.1 What is a deductibility adjustment?
- 5.8.2 Differences between a Transitional Letting and a letting covered by the Standard Rules
- 5.8.3 Differences between the deductibility adjustment and the CGS – the effect of development on a deductibility adjustment
- 5.8.4 The Entitlement to an additional VAT credit on selling or leasing the property after paying a deductibility adjustment
- 5.8.6 The impact of making a taxable letting after paying a deductibility adjustment
- 5.8.9 Opting to Tax a Transitional Letting DOES NOT give you Additional VAT Recovery
- 5.9 The Third and Fourth Transitional Transactions – Transitional Assignments & Transitional Surrenders
- 5.9.1 Is it a Transitional Assignment/Surrender – Have you had the interest for less than 20 years?
- 5.9.2 Is the Transitional Assignment/Surrender taxable or exempt?
- 5.9.3 The VAT Treatment of a Premium paid for the Assignment/Surrender of a Legacy Lease
- 5.9.4 If you make a taxable assignment or surrender you may get an additional VAT repayment
- 5.10 Summary Check List for Assignments/Surrenders of a Transitional Interest
- 5.11 Reverse Charge
- 5.12 The Document
- 5.13 CGS Implications for the Assignee/Landlord Arising from the Assignment/Surrender of a Legacy Lease
- 5.14 The Sale of a Property After the Surrender of a Transitional Lease
- 5.15 Lettings after the surrender of a transitional lease
- 5.16 Use of a Property After the Surrender of a Transitional Interest
- 5.17 The Status of an Assigned Transitional Interest
- PART II – THE APPLICATION OF THE CGS TO TRANSITIONAL INTERESTS
- 5.18 What Transitional Interests Does the CGS Apply to?
- 5.19 Applying the CGS to Transitional Interests
- 5.20 The CGS Implications of Disposing of Your Transitional Interest
- 5.21 Amendments to the CGS so that it can apply to Transitional Interests
- 5.22 Transitional Interests Acquired After 1 July 2007
- CHAPTER 7 THE IMPACT OF EU LAW ON IRISH VAT ON PROPERTY
- 7.1 Introduction
- 7.2 The Relationship between Irish and EU VAT Law
- 7.3 The Meaning of the Word “Letting” for VAT Purposes
- 7.3.1 Hotel sector or sector with a similar function – Blasi
- 7.3.2 The definition of letting given by the European court
- 7.3.3 Licences
- 7.4 The VAT Rules on using a Property for both Business and Non-Business Purposes
- 7.5 ECJ Decisions on the Non-Business use of Business Assets
- APPENDIX I VAT ON PROPERTY GUIDE
- Chapter 2 – The Supply of Property – New System
- 2.1 Taxable and Exempt Supplies
- 2.2 What supplies of property are subject to VAT? (Section 4B)
- 2.3 What is meant by developed? (Section 1)
- 2.4 What is minor development in relation to a property?
- 2.5 When is a property supplied in the course of business?
- 2.6 What is meant by a supply of property for VAT purposes? (Section 3)
- 2.7 When does a supply of property take place for VAT purposes?
- 2.8 When is the supply of a completed property taxable? (Section 4B(2))
- 2.9 What is the position where a property is not completed at the time of supply?
- 2.10 Are there any further exceptions to the two and five-year rules? (Section 4B(3))
- 2.11 When is a property completed? (Section 4B(1))
- 2.12 Occupation
- 2.13 Exempt supplies
- 2.14 Can the supply of ‘exempt properties’ ever be taxable?
- 2.15 Supply in connection with an agreement to develop property (Section 4B(3))
- 2.16 What is the taxable amount for the supply of property?
- Chapter 3 – Supply of Property – Transitional Measures
- 3.1 What is the treatment of such properties from 1 July 2008? (Section 4C)
- 3.2 What is the treatment when the holder was entitled to deduct any of the VAT incurred on the acquisition or development of the property?
- 3.3 What is the position where the person making the supply was not entitled to deduct any of the tax incurred on the acquisition or development of the property? (Section 4C(2))
- 3.4 What is the position if further development is carried out on the property on or after 1 July 2008?
- 3.5 Does the CGS apply to such a property? (Section 4C(10))
- 3.6 What is the CGS adjustment period for transitional properties?
- 3.7 What are legacy leases? (Section 4C(1))
- 3.8 How are such leases dealt with under the new VAT on property provisions? (Section 4C(4))
- 3.9 What is the position where a tenant was entitled to deduct any of the tax incurred on the acquisition of the lease? (Section 4C(6))
- 3.10 What is the position where the tenant was not entitled to deduct any of the tax incurred on the acquisition of the lease?
- 3.11 What is the CGS adjustment period for legacy leases? (Section 4C(11))
- 3.12 Who is responsible for the VAT chargeable on the assignment or surrender of a legacy lease? (Section 4(8))
- 3.13 What is the tax payable amount where the assignment or surrender of a legacy lease is taxable?
- 3.14 What obligations does the person making the assignment or surrender have for VAT purposes?
- 3.15 What is a reversion?
- 3.16 What is the tax treatment of the sale of a legacy lease reversion?
- 3.17 What is the treatment of a legacy lease reversion where the lease is surrendered?
- 3.18 What is the VAT treatment of post-letting expenses in relation to legacy leases?
- Chapter 4 – Letting of Property – New System
- 4.1 Overview
- 4.2 Lettings are exempt from VAT
- 4.3 Option to tax lettings (Section 7A(1))
- 4.4 How does a landlord opt to tax a new letting?
- 4.5 Can a landlord opt to tax the letting of a property where previous lettings were exempt?
- 4.6 Can all landlords opt to tax their rents? (Section 7A(2))
- 4.7 When is a landlord regarded as connected with a tenant or a person who occupies a building owned by the landlord? (Section 7A(3))
- 4.8 Can a landlord terminate an option to tax rents?
- 4.9 What happens if an option to tax is terminated?
- 4.10 On what amount is tax chargeable when a letting is opted?
- 4.11 What is the VAT treatment of premiums under the new VAT on Property rules?
- Chapter 5 Lettings of Property – Transitional Measures
- 5.1 What was the position prior to the introduction of the new system? (Section 7)
- 5.2 What changes occur from 1 July 2008 in the waiver system? (Section 7 and 7B)
- 5.3 Are there any further restrictions on existing waivers of exemption? (Section 7B(3))
- 5.4 What will be the position as regards other properties that the landlord has and that are subject to the waiver of exemption?
- 5.5 What is the position if the connected tenant is entitled to deduct at least 90% of the VAT chargeable on the rent?
- 5.6 Are there other exceptions to the cancellation of a waiver where the landlord and tenant are connected?
- 5.7 What is the permitted minimum rent that must be payable? (Section 7B(4) and (5))
- 5.8 How does the Capital Goods Scheme operate in relation to properties that are subject to a waiver of exemption? (Section 7B(2))
- Chapter 6 – Capital Goods Scheme – Main Provisions
- 6.1 What is the Capital Goods Scheme?
- 6.2 How does the scheme operate?
- 6.3 When does the scheme apply? (Section 12E(1))
- 6.4 When does the scheme not apply?
- 6.5 “VAT-Life” (adjustment period) of a capital good (Section 12E(3))
- 6.6 Intervals
- 6.7 Obligations at the end of the Initial Interval (Section 12E(4))
- 6.8 Second and subsequent intervals (Section 12E(5))
- 6.9 Adjustment where property use is linked to overheads
- 6.10 Big–Swing in taxable use (Section 12E(6))
- 6.11 Development by the tenant (Section 12E(8))
- 6.12 Obligations – the “capital good record” (Section 12E(12))
- Chapter 7 – Capital Goods Scheme – Other Adjustments
- 7.1 Sales of capital goods
- 7.2 Taxable sale during the adjustment period (Section 12E(7))
- 7.3 Exempt sale during the adjustment period (Section 12E(7))
- 7.4 Obligations for the purchaser
- 7.5 Taxable Sale
- 7.6 Exempt Sale
- 7.7 Development by a tenant (Section 12E(8))
- 7.8 Assignment or surrender of lease where development carried out by tenant
- 7.9 Passing on scheme liabilities in certain circumstances (Section 12E(8))
- 7.10 Exercising and terminating a landlord’s option to tax a letting (Section 12E(6))
- 7.11 Property Developer/ Builder lets residential property prior to supply
- Chapter 8 – Capital Goods Scheme – Transfer of Business as a Going Concern
- 8.1 Background
- 8.2 CGS and transfer of a business
- 8.3 Transfer of property during the period when property considered “new” (Section 12E(3) and (7))
- 8.4 Transfer of property during the period when property outside “new” period (Section 12E(10))
- 8.5 Interaction with Section 13A VAT Act 1972 (as amended)
- APPENDIX II FAQs VAT ON PROPETY
- APPENDIX III VALUE-ADDED TAX INFORMATION LEAFLET NO.3
- APPENDIX IV VALUE-ADDED TAX INFORMATION LEAFLET NO.4
- APPENDIX V LIQUIDATORS AND RECEIVERS
- APPENDIX VI GUIDE TO VALUE ADDED TAX
- APPENDIX VII SERVICE CHARGES
- APPENDIX VIII VALUE-ADDED TAX INFORMATION LEAFLET NO.1/01
- APPENDIX IX TAX REGISTRATION FORMS, TR1 AND TR2
- APPENDIX X VAT RETURN
- APPENDIX XI LAW SOCIETY DOCUMENTS
- APPENDIX XII DEROGATION
- APPENDIX XIII CASES
- APPENDIX XIV STATUTORY INSTRUMENT 238 OF 2008