

New Rules Could Have Big Impact On Real Estate Transactions
HM Revenue & Customs has recently announced several changes of policy to the VAT rules concerning transfer of going concerns (TOGC) which could have a considerable impact on real estate transactions both past and present.
HMRC has confirmed that the surrender of a lease subject to a lease can in certain circumstances be a TOGC. This reversal in policy has retrospective effect and therefore surrenders undertaken in the last four years could now be examined and any overpaid VAT and SDLT reclaimed.
The grant of a lease together with the disposal of a business can also be a TOGC according to the new rules. This is an extension of HMRC’s recently issued guidance in which it stated that the grant of a lease could be a TOGC where this related to a property letting business. This new guidance could assist many including, for example, a purchaser of retail business who acquires the business, but can only obtain a lease of the premises from which the business operates as opposed to an assignment or freehold transfer.
The ‘person constructing’ status can also transfer on a TOGC so that transferees of new constructed dwellings, relevant residential and relevant charitable buildings could be considered to make zero rated supplies of these properties as opposed to exempt supplies.
Alex Barnes, Real Estate Tax Partner at law firm Irwin Mitchell, said: