Selling your business premises – beware of the VAT implications

When you purchased your current business premises you reclaimed the VAT included in the purchase price. Now you’re moving to larger premises and are selling the old property. Nicola Roby, Director, looks at how you should handle the VAT.

VAT on the purchase of buildings

If you are buying a commercial property which is neither VAT exempt nor being sold as part of a business, the seller must add VAT to the price. If you are VAT registered and intend to use the property for a business that makes only VAT related supplies, you can reclaim the VAT charged by the seller. Straightforward so far, but things can get complicated if you sell the property at a future date.

You would imagine that if you sell a property (other than as part of your business) on which you reclaimed the purchase VAT you must charge it on the sale price. However, that’s not the case. The purpose to which the buyer will use the property is a key factor.

In summary

If you sell a property within ten years of purchase which cost you in excess of £250,000 and you reclaimed the VAT charged, you may need to repay some of it if the buyer intends to use the property for an exempt purpose. You may need to factor this into the price you charge or persuade the buyer not to exempt the transaction.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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