I am intending buying a commercial property from a person who has himself just bought it into his own VAT registered limited company – he wants to sell immediately thereafter having changed his plans.
He will have opted for tax and paid VAT and will be reclaiming VAT to the company I will purchase via share transfer.
I’m not sure how that is going to work in terms of refunding his VAT to him. I can only think of the following:
(1) The share transfer is delayed until after the current owner receives his VAT reclaim in his next return (2) I pay the purchase price plus VAT, and then after the share transfer the reclaimed VAT will come to the company I will then own. I am not sure that’s good for me, as any risk of the VAT reclaim failing then falls to me, and there is also the matter of how much tax I would have to pay to take the reclaimed VAT out of the company, which I would need to do to put towards the loan I have taken out for the property purchase. (3) I put the money in escrow until such time as the VAT reclaim is complete and then it goes to the current owner. If the VAT reclaim instead fails the money in escrow is returned to me. That derisks the VAT reclaim from my perspective, although still leaves issue with tax incurred on taking the VAT out of the business if VAT reclaim is successful. (4) There is some binding arrangement that I will return the reclaimed VAT when it is received. Again leaves the issues of tax incurred on doing that.
Curious how this might proceed as current owner is about to propose plans for this, and wanted to be ready in advance.