VAT on French Leaseback

[Ragwort]

Hi, I bought a French leaseback property ten years ago and recently sold it to cut my losses, which were in the region of 60%. As with all leasebacks, I was given a refund of the VAT on purchase, contingent on staying in the leaseback arrangement for twenty years. My French accountant has now advised me that I must make a pro rata repayment of 13,000 to French revenue for VAT. Having been roasted in what I have come to view as little more than a state-sponsored scam, I am reluctant to make this payment.

Does anyone have a similar experience? In practical terms, what powers do French Revenue have to pursue for this money, and are they likely to pursue me?

 

[MrEarl]

Hello,

What your accountant is telling you about having to repay the VAT (pro-rata) is correct, as I understand it.

In truth, I think just about anyone I have ever spoken to who bought a French sale and leaseback, feels they were very badly mislead and subsequently when things went wrong (as they almost always did), there was no support from the French authorities etc. As such, you are probably in very good company, in terms of how you are feeling about the experience.

That said, I would expect the French tax authorities to take legal action against you and if necessary, have the results of any French judgement they might obtain against you, enforced here also. Remember they don't need to worry about who is paying the legal bill, so they have nothing to lose by chasing you for the debt !

I am actually surprised you managed to get your sale proceeds, without the payment for vat being retained by your French lawyer.

As an aside, I am fairly sure you can offset your Capital Loss on this investment against future Capital Gains (here in Ireland) if you are lucky enough to have any.

 

[Surviver.]

Hi.

I sold one of those leasebacks 4 years ago after owning it for about 6 years.I was one of the few people who managed to sell it and make a profit.Anyhow at the time I didn't have to pay back any vat.My I understanding is that the vat does not have to be repayed if
the property is still been run as a leaseback residence. It's a different story if the lease agreement is no longer in place.Anyhow I have heard nothing since.

 

[Ragwort]

Thanks to MrEarl and Surviver for their answers. I did break the leaseback arrangement on this property (at a penalty of over ten grand) in order to make it saleable, and thus the liability for the VAT. Looks as if I may have to grin and bear it.