MJ O'Connor Solicitors

The Finance Act 2008 enacted into law the new VAT on property regime. The regime comes into effect from 1^st July 2008.

 

The new regime completely changes the treatment of VAT on property. It is imperative that everyone dealing with property would become familiar with the new VAT laws to ensure compliance and also to determine how the changes will impact on existing property owned and future planned transactions.

 

With a full understanding of the new regime property owners will be able to guard against potential VAT exposures.

 

The new VAT laws are somewhat complex but provide in essence:-

o       Sales of new property will be taxable at 13.5% rate.

o       Sale of second hand property will be VAT exempt but with an option (to be exercised jointly) to tax the transaction available.

o       Lettings of property are exempt from VAT but with an option to tax available for the landlord for non-residential properties.

 

There are transitional rules to deal with leases already in existence on 1^st July 2008.

 

A capital goods scheme will apply whereby property is given a VAT life and VAT initially deducted on acquisition or redevelopment will be subject to review and adjustment over the VAT life of the property. 

 

It is vitally important that property owners understand and comply with the obligations under the new capital goods scheme. This involves reviewing and adjusting VAT over the lifetime of the property – up to 20 years and up to 10 years.

 

In order to comply with the obligations under the capital goods scheme the property owner will need to keep accurate VAT records on the properties and any enhancement and refurbishment to the properties. 

 

For further information on the most important tax change relating to property in recent times please contact John O’Leary (joleary@mjoc.ie) or Catherine O’Connor (coconnor@mjoc.ie) of our commercial property department.