VAT status of the Stonebridge Portfolio
Option 1 – Transfer of Business
As the sale will give rise to a transfer of trading stock, leased property, vacant property and a trading carpark, the vendor will be seeking to avail of VAT transfer of business relief (“TOB”) for the entire portfolio, if the purchaser is an accountable person. Therefore the purchaser must confirm that they are an accountable person i.e. a taxable person who engages in the supply within the State, of taxable goods or services (Section 5(1)(a) VATCA 2010). i.e. essentially a person in business who is registered for VAT purposes.
Where a purchaser is able to proceed with a TOB (i.e. a purchaser who is an accountable person), offers will have to be broken down against the various assets (and will be treated as net by the vendor) as the purchaser may have obligations under the Capital Goods scheme in relation to some of the assets, depending on the use to which the assets are put by the purchaser.
Option 2 – Jointly opt to Tax
If the purchaser is not an accountable person and cannot avail of TOB, the vendor will seek to agree to jointly opt to tax (“JOT”) the sale. Under section 94(7) VATCA 2010, for the joint option to tax to apply, the purchaser must be a taxable person i.e. a person who independently carries on a business in the EU or elsewhere (Section 2 VATCA 2010).
Where a purchaser agrees to apply the JOT to the sale, any offer submitted will need to be broken down as follows:
Individual Commercial Units – the JOT means the purchaser will “self-account” for the VAT on this part of the sale and as such the vendor will treat this portion of the offer as net;
The Apartments – the vendor will be obliged to account for VAT out of the portion of sale proceeds allocated to the apartments at lower rate of 13.5%. NOTE: This will be taken into account when reviewing offers at the conclusion of the sale process.
