Buy a site as a company, build property, does full sell price include Vat?

Superbar365

New Member
Messages
3
Hi, finding very hard to get an answer on this (without troubling my accountant). If a business buys a site with planning permission from an individual who happens to be selling his side garden for example for €200k, the business then builds the house for €150k and then sells the house for €500k hypothetically.
Does the €500k sale price include Vat of 13.5%? Or is Vat just charged on the sale price less the site price which would be vat on €300k? If the vat is been charged at the €500k level should the business been able to claim vat back on €200k site sale price, if not then surely there's something wrong there?
I know its a bit confusing but to put it another way if the latter is the outcome, if the business bought the site for €200k and decided to do nothing with it and sold it again in 3 months for €200k then surely there would be no vat on that sale if no vat was claimable from the purchase price.
 

dublin67

Frequent Poster
Messages
218
On a matter like this I would be troubling your accountant - vat on property is difficult. Vat is chargeable on the full sale price as the property has been developed. €500K is the sale price so the vat exclusive price is €500 X 100/113.5 and the vat is €59,570. The fact that the site is developed is what brings it into the vat net. If it buys and sells it and does not develop it then no vat. If it buys a site for €200K you can reclaim the vat only to the extent that vat was charged - no vat charged, no vat to reclaim.
 

Superbar365

New Member
Messages
3
So if someone sells a site to a company for €200k is there Vat included in that that is reclaimable? As if there was then the vat reclaimable would be €200k x 100/113.5 making it €22,700 so if you took that away from the €59570-€22700=€36870 it makes quite a difference on the profit margin of developing the property.
 

torblednam

Frequent Poster
Messages
389
So if someone sells a site to a company for €200k is there Vat included in that that is reclaimable? As if there was then the vat reclaimable would be €200k x 100/113.5 making it €22,700 so if you took that away from the €59570-€22700=€36870 it makes quite a difference on the profit margin of developing the property.
No, there’s no VAT in the 200k in the scenario you describe. If there was, then every joe public selling their own private house (or part thereof) would be liable to pay the VAT over to Revenue, and be entitled to recover the VAT they paid on their purchase.
 

Superbar365

New Member
Messages
3
Yes that's true but now you see that ok there is no Vat on the site however if then vat is included in the whole €500k sale price then you actually end up paying vat on it
 

RedOnion

Frequent Poster
Messages
3,132
Yes that's true but now you see that ok there is no Vat on the site however if then vat is included in the whole €500k sale price then you actually end up paying vat on it
The buyer pays VAT on the entire. You need to factor it into your assessment of whether it's worthwhile as a development.
 

dublin67

Frequent Poster
Messages
218
I've seen situations where vat was charged on the sale of property and it was incorrectly charged. The Revenue refused to refund the vat and told the purchaser to reclaim it from the vendor. In this instance the vendor was in hock up to his neck and there was little chance in getting it back. Last time I heard, this was a good while ago, the purchaser's solicitor was getting sued. Vat on property is complicated and the numbers are big - it is a big risk area to advise on.
 
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