When buying a commercial property which is fewer than three years old, the purchase will attract value added tax (VAT) on the purchase price at the prevailing rate, which is currently 20%. If the commercial property is older than three years, however, and if the current owner has opted to tax the property, standard rate VAT will also be applied.
As a VAT registered company, you can claim back the 20% tax after a lengthy period of time. However, 20% is a sizeable chunk of any budget and for the purposes of cash flow and financial stability, it can be a limiting factor in any business project as, traditionally, commercial lenders will not include VAT in their loan calculation, leaving borrowers to fund the extra cost.
A proposed solution of offering the VAT sum amount upfront, by means of a loan, can ease client liquidity and ensure the safe completion of their project. We work with trusted specialists who can do this for you.
WHAT DO YOU NEED TO KNOW ABOUT VAT LOANS?
When purchasing commercial property, having to add VAT as well as stamp duty to the purchase price can be very limiting for investors. This is where VAT invoicing can come in and relieve some of the financial pressure.
Commercial property owners can opt to tax, charging VAT when selling or leasing their property, the new owner must then pay VAT on the purchase price. If an option to tax is exercised by the owner of the property, they can then charge VAT on all supplies they make relating to that property, including when they choose to sell the property. Businesses are then able to claim back VAT on incurred costs such as refurbishment.
HOW CAN ENNESS HELP WITH VAT LOANS?
Enness works with a trusted partner who can provide VAT loans to clients; covering the VAT bill up front, whilst you wait to be reimbursed by HMRC.
To discuss your purchase with one of our expert brokers, get in touch and we would be delighted to chat through your options and refer you to our partner as appropriate.