New VAT on Property Regime - 2008
New VAT on Property Regime – Change in Contract for Sale
Practitioners will be aware that a new regime for VAT on property will come into effect on 1st July 2008. However, practitioners are at this stage dealing with, and entering into, contracts that will not complete until after 1st July 2008, which will be subject to the new regime. Consequently, a new sub-clause to the standard Contract for Sale has been drafted to take account of the proposed VAT changes.
The which is currently before the Oireachtas introduces a new regime for VAT on property. A sub-committee has been set up by the Taxation and Conveyancing Committees to examine the implications of same and to review the VAT provisions of the Society’s Particulars and Conditions of Sale and the Requisitions on Title. This process will take some time as the Bill has not yet been enacted and it will be necessary to let the new regime bed-in to ensure that the new documentation is as comprehensive as possible.
Practitioners, however, are dealing with and entering into contracts at this stage which contracts will not complete until after 1st July which will be subject to the new regime.
Certain properties which are now within the VAT net will not be in the VAT net under the new regime unless an option to tax is exercised jointly by the Purchaser and the Vendor. If the option is not made, the Vendor will not be able to charge VAT, but could be subject to a claw-back in relation to the input credit received in respect of the property.
As an interim measure, the sub-committee has drafted a clause to be inserted as Special Condition 3(e) of the Contract for Sale. This condition entitles the Vendor to require the Purchaser to exercise a joint option to tax in order that a claw-back of the input credit can be avoided. Solicitors acting for the Purchaser should consider the implication of the clause for their client before agreeing to same. If in doubt, specialist advice should be obtained. View the new sub-clause.
The sub-committee has also prepared a table which sets out some of the key points of the new provisions and the implications of same. The table is for guidance only and is not a substitute for reading and applying the legislation. View the table of key points.