Reply To: Claiming VAT on professional fees for sale of commercial property as a TOGC

Forum Categories VAT ON PROPERTY TRANSACTIONS Claiming VAT on professional fees for sale of commercial property as a TOGC Reply To: Claiming VAT on professional fees for sale of commercial property as a TOGC


Hi Trevor, firstly thank you very much for your clear and detailed reply – it has taken me a while to log back into this site for some reason so have not been able to read responses to my post.
Just to provide some context – we naively bought an apartment hotel suite in a hotel room as an investment a long time ago – we were given a guaranteed income per month for the room and the hotel management would also provide us the figures to submit every quarter for our VAT return, but paid the VAT to HMRC directly on our behalf (and for all other hotel room owners). We became VAT registered simply for this hotel room investment, and have no other taxable supplies or business related to this VAT registration. We managed to find a buyer earlier this year and sold the hotel room unit 2nd July and did not charge VAT on it as both we and the purchaser met the TOGC criteria (purchaser carrying on with the same business – i.e. income from the hotel room, VAT registered and opted to tax).

We were advised (clearly wrongly) that there was no rush to de-register – just complete the next normal VAT return due for the period Jun-Aug and claim your transaction costs for this sale (basically VAT on the legal and agent fees) within that return in the appropriate box – submission of this return is due end of this month/first week of October. Then de-register after that. I can see now that we could have de-registered and then completed the final return to the date of the sale (2nd July) even though it was partway in the-quarter? The figures would be easy, as the hotel management has retained all income since the covid pandemic, so we have been submitting nil VAT returns since the beginning of last year. So our final vat return would be nil again, except for the claim on the VAT for the professional fees for the sale of the hotel room.

However, we are now in what seems a more complicated position as the hotel management a few weeks ago decided to pay hotel room owners the income generated from their rooms in 1st Quarter 2020 into our accounts now, in the middle of this quarter, post-sale – we enquired whether we should therefore be amending the VAT return for that 2020 quarter that this income relates to – and we were told, no, the VAT figures related to this income will be provided to us for submission for this next Jul-Aug return, as the invoice was raised in August

So I am utterly confused and tearing my hair out- we have received Q1 2020 income now post-sale of the unit, we need to fill in the next VAT return Jun-Aug by first week of October – this will contain figures related to this invoice, but our ownership of the unit ended 2nd July. 

So is the easiest thing to do now – deregister, write a note explaining what has happened and then claim for the professional fee VAT costs via VAT427 – if we deregister do we even have the facility to fill in the next normal (Jun-Aug) VAT return in any case – presumably not- or do we have to deregister and ask them for this 6 month grace period to make the declarations for this next VAT return and then submit a ‘final return’ after that. 

Nearly 6 weeks on, and I still have not received a reply from HMRC that I sent on 27th July, which is so frustrating when we are desparately seeking clarity to do the right thing!