¾«Æ·¹ú²ú×ÔÏßÎçÒ¹¸£Àû

The pre-contract VAT enquiries are for use in the context of the sale of a freehold, the sale of a freehold equivalent (that is, a long leasehold interest disposed of for a premium with a peppercorn rent), and the surrender or assignment of a legacy leasehold interest (that is, a leasehold interest of ten years or more created before 1 July 2008. They are not suitable for use, and should not be used, in the context of an occupational type lease.

The Society’s initial set of pre-contract VAT enquiries was published as a working draft on the website in April 2009 and circulated to the profession in May 2009. At that time, members of the profession were invited to submit comments and suggestions for improvement, based on their experience of using the working draft in practice and applying them to live transactions. Relatively few comments were received by the Society, and no significant changes were requested. The committees have made some minor changes and have decided to adopt the working draft as final and publish it as the October 2010 edition.

The pre-contract VAT enquiries (October 2010) are now available in the members’ area of the Society’s website by following links for the Conveyancing or Taxation committees. Solicitors are reminded of the following five guidelines when using the precedent enquiries document:

1. It is the intention of the committees that the enquiries should be raised by the purchaser’s solicitor and responded to by the vendor at the pre-contract stage. This is vital if the purchaser’s solicitor is to be in a position to advise his or her client on the VAT implications of the transaction.
2. Prior to issuing the enquiries to the vendor’s solicitor, the solicitor acting for the purchaser must complete the purchaser’s statement on page 2 of the enquiries.
3. Although the enquiries are to be raised by the purchaser’s solicitor, it is the view of the Conveyancing and Taxation Committees that they will also prove to be a useful tool for a vendor’s solicitor and should be completed by the vendor prior to the drafting of the contract for sale, thus enabling the vendor’s solicitor to draft the VAT special condition appropriately, according to the circumstances of the transaction. Members are reminded that, unless special condition 3 is struck out in its entirety because no VAT issues arise, it is inappropriate to issue a contract for sale without deleting inapplicable option paragraphs in that special condition.
4. On closing, the purchaser’s solicitor ought to seek confirmation from the vendor’s solicitor that the replies to the enquiries are still correct and accurate.
5. Whether acting for a vendor or a purchaser, the committees advise all members that, unless they are expert in the application of the new VAT system or the transaction is a straightforward one and the member is fully satisfied that he or she has been furnished with the complete VAT history of the property, they are strongly recommended to advise all clients to engage the services of a specialist VAT or tax adviser to ensure that the vendor client answers each of the enquiries correctly, and the purchaser client understands the significance of each response given.

The vendor’s solicitor should bear in mind that a vendor may have acquired a property utilising transfer of business relief (section 3(5)(b)(iii)), using a VAT 13B authorisation (section 13A), or using a VAT 4B (section 4A). In such circumstances, a vendor may be under the impression that no VAT arose on acquisition, but, for most VAT on property rules, one must consider what VAT would have been chargeable to the vendor on acquisition, but for the application of these reliefs.

Because the committees are conscious of the fact that these enquiries have not been stress-tested in a fully-functioning property market, they are open to a review of same in future, if required.