Purchase of units by a charity

Purchase of units by a charity

If you run a charity and want to purchase commercial property, what is your VAT position?

This is a situation which faced my client – a charity – when it wanted to buy two commercial units.

The background

A fully taxable business purchased two units, one of which it wholly occupied and the other only the first floor, with the ground floor let to a third party.

The vendor had charged VAT so the business had to opt to tax to recover all the VAT charged, including the VAT on the part that was let to a third party.

The business then went into administration and the property was put on the market with the third-party lettings still in place.

The outcome

A charity with taxable, exempt and non-business activities wanted to buy the units.

I was able to advise the charity on how to minimise the VAT on its purchase of the units and on its ongoing VAT compliance obligations arising from the transaction.


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