Taxation for property: VAT and CGT and SDLT

Question 1

VAT exempt supplies

what are they?

Answer 1

residential property (except for newly constructed property)

commercial property over 3 years old (unless owner exercises option to tax)

buy to let properties

Question 2

VAT zero rated supplies

what are they?

Answer 2

newly constructed residential property

–> no VAT payable BUT seller can recover input tax via offsetting

Question 3

VAT standard rated supplies

what are they?

Answer 3

commercial property less than 3 years old

commercial property more than 3 years old ONLY if seller opted to tax

Question 4

VAT and SCPC (standard conditions of sale - commercial)

Answer 4

1) Standard Condition 2 (default - commercial properties less than 3y or if seller opted to tax) = standard rated 20% (exclusive of purchase price)

tick these if default is not applying:

2) Special Condition A1 (for exempt supply) = seller warrants that property is not subject to VAT and agrees not to exercise option to tax
–> FOR COMMERCIAL PROPERTIES OVER 3 YEARS OLD

3) Special Condition A2 (for transfer as an ongoing concern) = seller warrants that it is using property for the business of LETTING to produce rental income
–> TOGC IS EXEMPT

Question 5

When is VAT payable in commercial transactions?

Answer 5

property is less than 3 years old

or

seller opted to tax otherwise

Question 6

when are (individual) sellers exempt from paying CGT on the gain made?

Answer 6

principal private residence/dwelling house exemption

spouses/CP only have 1

5 criteria:

1) You have one home and you have lived in it as your main home all the time you have owned it

2) You have not let part of it out (you are allowed to have a single lodger)

3) You have not used part of it for business only

4) The grounds, including all buildings (house, garden and grounds), are less than 5,000 square metres (over an acre or 0.5 of a hectare) in total (CGT payable on the excess)

5) You did not buy it just to make a gain

Question 7

SDLT/LTT

on what are they charged?

when are they payable?

Answer 7

charged on purchase price after completion

SDLT payable within 14 calendar days of completion date OR occupation date (whichever happens first)

LTT payable within 30 calendar days of completion

there are different rates for SDLT and LTT, and for residential and non-residential buyers

residential buyers pay lower SDLT rates if they are first time buyers (does not apply to LTT)

residential buyers acquiring a second property pay higher SDLT/LTT rates

Question 8

SDLT basis for calculation of commercial leases vs residential long leases

Answer 8

commercial leases with market rent payable = basis for calculation is the net present value

residential long leases = basis for calculation is the premium payable when getting the lease