We strongly recommend that VAT advice is obtained from a suitably qualified individual IN ALL CASES. GPC SIPP Ltd does not and cannot provide VAT advice. The following information is intended as a general guide ONLY and you should not act on, or fail to act on, the information provided.
VAT on Property Purchase
VAT will be payable by a SIPP on the purchase of the property if:
- Construction of the property was completed less than five years ago
- The Vendors of the property have previously opted to tax the property (the effect of opting a property for VAT is considered below)
The Effects of Opting a Property for VAT
If a property is opted for VAT it means that:
- The member can reclaim the VAT paid on the purchase price and any associated costs including solicitors’ and surveyors’ fees and any further invoices paid by GPC SIPP relating to the property.
- VAT can also be reclaimed on any refurbishments which are funded through the SIPP.
- VAT will be charged on the property’s rental income (if the tenant is registered for VAT they may be able to reclaim this).
- When the property is sold, VAT will be charged on the sale price.
Notifying GPC SIPP of a Decision to Opt a Property
A member may decide to opt a property for VAT when their SIPP purchases the property.
The decision to opt a property must be made prior to the completion of the purchase of that property. GPC SIPP Ltd needs to be advised as early as possible if the property is to be opted for VAT. Therefore if a member wishes to opt a property for VAT this must be notified to GPC SIPP Ltd when the Property Questionnaire is completed by the member/s. Failure to notify GPC SIPP Ltd at that point may mean that the property cannot be opted and therefore any VAT incurred on the sale or any subsequent refurbishments may be irrecoverable. It should be noted that once a property has been opted for VAT, it will remain subject to VAT for a minimum of 20 years or until sold.
VAT Exemption of a Property
A member can choose not to opt a property for VAT. This can be done regardless of whether the previous owners had opted the property for VAT. A decision not to ‘opt in’ a property will mean that no VAT is chargeable by the SIPP on rentals. However, the member’s SIPP account will not be able to reclaim any VAT paid in respect of the purchase price or any other associated payments funded through their SIPP, should this be due.
Reclaiming VAT Paid on the Purchase
If VAT paid on the purchase of a property is to be reclaimed by the SIPP, the process will be as follows:
- A VAT invoice showing the vendor’s VAT registration number, the tax point date and the actual VAT amount, separate from the total invoice amount, will need to be obtained from the vendor’s solicitors and sent to GPC SIPP Ltd.
- All VAT claims are made by GPC SIPP when completing the scheme’s VAT returns.
- The VAT paid by the member’s SIPP is then repaid by HM Revenue & Customs after Guardian submits the VAT claim.
Purchasing a Going Concern
Even if a property has been opted for VAT by the vendor, it may be possible for the property to be sold without VAT being charged in circumstances where there is an ‘ongoing’ tenancy (ie. where the purchase can be treated as a ‘transfer of going concern’). You should note that a property can only be considered to be a transfer of a going concern if the purchaser opts for VAT before the purchase commences (i.e. before any deposit is paid).