This note deals in broad outline only with the requisitions on Value Added Tax. The

Transcription

1 LAW SOCIETY CONVEYANCING HANDBOOK CHAPTER 8 This ote deals i broad outlie oly with the requisitios o Value Added Tax. The issues ivolved ca be very complex. I the case of doubt, appropriate expert advice should be sought. These requisitios should be raised as pre-cotract equiries, or as part of the ivestigatio of the lessor s title where a lease is beig grated. ON TITLE 1 HISTORY OF ABLE INTEREST 1.1 Whe the Vedor acquired its iterest i the property was icurred o the acquisitio price? If o was icurred whe the Vedor acquired its iterest i the property, ad if the property has ot subsequetly bee developed, the it is likely that the curret disposal is outside the scope of. 1.2 Did the Vedor acquire its iterest i the property as a trasfer of a busiess or part of a busiess from aother able perso withi the meaig of Sectio 3(5)(b)(iii) A, 1972? Sectio 3(5)(b)(iii) A, 1972 relates to the acquisitio of a asset i the course of the trasfer of a busiess. If the aswer to 1.1 above is i the egative, but the aswer to this requisitio is affirmative, the the property may remai withi the charge to. 1.3 Has there bee ay "developmet" (withi the meaig of the Value Added Tax Act, 1972) o or affectig the property sice 1 November 1972? If a property has ot bee developed or redeveloped sice 1 November 1972, the it will be outside the scope of. I practice, if expediture o developmet work does ot exceed 10% of the cosideratio o the disposal, or of the value of the disposal for purposes, the it ca be igored i decidig if the property has bee developed, uless the developmet ivolves a chage of use. If the aswer to this requisitio is o, the uless a Purchaser iteds to cotract with a third party developer to develop the property ad i coectio with the curret acquisitio of the udeveloped property, eters ito a buildig agreemet, the curret disposal will be outside the scope of. 1.4 I relatio to ay icurred i relatio to either activities at 1.1, 1.2 or 1.3 above, did the Vedor become etitled to or recover ay elemet of o the acquisitio or developmet i accordace with Sectio 12 A, 1972? If the Vedor did become etitled to recover ay elemet of o the 8.9

2 CHAPTER 8 LAW SOCIETY CONVEYANCING HANDBOOK acquisitio or developmet, the regardless as to whether or ot the Vedor claimed back, the curret sale will be prima facie subject to uless the aswer to requisitio 1.5 is yes. 1.5 Has the property at ay time subsequet to recoverig iput as idicated at 1.4 above, become the subject of a self-supply withi the meaig of Sectio 3(1)(e) or 3(1)(f), A 1972? If so, please explai. It may be that, subsequet to the origial acquisitio of the property, it has bee removed from the et. This would happe if the Vedor was subject to a selfsupply withi the meaig of Sectio 3(1)(e) or 3(1)(f), A 1972, such as where the property was applied to a o-busiess use such as a private residece, or to a exempt use such as a short-term lettig where the ladlord did ot waive exemptio of o the ret, or the property was used for tradig as a exempt activity such as a fiacial istitutio. Additioally, the creatio of a log lease, beig a lease for a period of greater tha te years will give rise to a self-supply withi the meaig of Sectio 3(1)(f), A 1972 with respect to the ladlord s reversioary iterest. 2 IS THE CURRENT SUPPLY ABLE? 2.1 Is the curret disposal a trasfer of a busiess or part of a busiess to aother able perso withi the meaig of Sectio 3(5)(b)(iii), A 1972? If the disposal of a iterest i property is part of a trasfer of a busiess or part of a busiess betwee two able persos, the supply would ot be subject to, as the coditios of Sectio 3(5)(b)(iii) A 1972 apply. Where this Sectio applies, the the Purchaser should record that this is the reaso why was ot icurred o its acquisitio of the property as the property remais withi the et i relatio to future supplies. 2.2 Does arise o this trasactio at ay rate of? There are three rates of applicable to property trasactios, beig zero, 12% ad 21%. The zero rate would apply where the Purchaser is a holder of a Sectio 13A authorisatio (available to certai compaies who supply goods out of Irelad). Eve if the curret disposal attracts at a zero rate, it is importat that the Purchaser record this as it will be relevat with respect to ay future dealigs by the Purchaser with the property, as the property remais withi the et If o arises, please explai why. It is importat to record whether arises o the disposal. Ay explaatio as to why does ot apply must be cosistet with the aswers provided i Sectio 1 above.

3 LAW SOCIETY CONVEYANCING HANDBOOK CHAPTER If does arise, please explai why. Agai it is importat to record o what basis arises. This should be clear from the replies at 1 above. 2.5 If does arise, how is the amout of calculated? There are three methods that may be available i calculatig the amout of the liability o the grat of a lease of 10 years or more. The basis to be applied i calculatig the should be agreed at the begiig of the trasactio. I other disposals the rate of should be specified. I dealigs i lad this will be 12.5%. However care should be take to avoid a " cocktail" whereby differet items passig uder the oe cotract or other istrumet attract differet rates of. Uless a separate cosideratio is attributed to each, the cotract or other istrumet will attract o the etire cosideratio at the higher rate. 3. VENDOR CHARGING 3.1 Does the Vedor ited to charge to the Purchaser? The Vedor may ot charge to the Purchaser where the Sectio 4A authorisatio procedure is ivoked (see Sectio 4 below). I additio, certai assigmets of iterests betwee parties will ot give rise to a liability for the Vedor to charge, but may give rise to a reverse charge liability for the Purchaser. 3.2 Is the curret disposal a taxable assigmet or surreder of a leasehold iterest such that the provisios of Sectio 4(8), A 1972 apply so that the Vedor is ot accoutable for o the supply? This requisitio deals with a assigmet or surreder of a leasehold iterest ad seeks to clarify whether the curret disposal is a qualifyig disposal withi Sectio 4(8) so that the Vedor will ot charge o its disposal (the Purchaser beig accoutable). Sectio 4(8) will apply where the assigee or perso takig a surreder is: a. A taxable perso, b. A Departmet of State or Local Authority icludig a health board, c. A perso supplyig immovable goods ot subject to, d. A perso egaged i the supply of fiacial services as outlied i paragraph (i) First Schedule A 1972, e. A perso egaged i the exempt lettig of immovable property, f. A perso egaged i travel agecy services, g. A perso egaged i isurace agecy or isurace brokerage services, h. A perso egaged i fiacial services brokerage or agecy busiess, i. A isurace compay, 8.11

4 CHAPTER 8 LAW SOCIETY CONVEYANCING HANDBOOK j. A Post, postmasters ad persos licesed to provide postal services, k. A perso egaged i atioal broadcastig ad televisio services, l. A perso egaged i the trasport of passegers ad accompayig baggage. O a assigmet to a taxable perso (or some other perso specified i Sectio 4(8), A 1972) the assigor does ot charge ay but rather the assigee is resposible for the. Where the assigee is etitled to full iput recovery he will ot have to pay over ay ad all that will be required of him will be a self-cacellig etry i his retur. I short o will be paid o the assigmet. The same positio will apply to a taxable surreder. 3.3 Where it is proposed to charge to the Purchaser, please furish a draft ivoice ow. The purpose of seekig the draft ivoice is so that the Purchaser may satisfy himself as to the calculatio of to be icurred with respect to the trasactio ad to cofirm that the form of the ivoice is i order. It should be oted that the amout of could chage prior to completio, cosequet upo a chage of the multiplier. 4. SECTION 4A A 1972 REVERSE CHARGE PROCEDURE 4.1 O the creatio of a lease of te years or more where the Purchaser idicates a itetio to avail of the Sectio 4A A 1972 procedure, please cofirm that the Vedor will agree to use the Sectio 4A A 1972 procedure. The Sectio 4A A 1972 procedure applies to leasehold iterests for a period of te years or more whe first created. Upo issue of the appropriate Form 4B, it is ot ecessary for the Vedor to charge o the creatio of the lease. This procedure may oly be availed of where the iteded lessee will have full (100%) iput recovery with respect to the lease iterest. Where the Sectio 4A procedure applies, the Vedor is required to issue a ivoice with the followig edorsemet i lieu of the amout of tax chargeable: "I accordace with Sectio 4A of the Act 1972, the lessee is liable for of ". 4.2 If so, please furish Form 4A with Sectio A completed. The Lessor/Vedor must complete Sectio A of the Form 4A. The Purchaser must the complete it ad retur it to the Vedor who will make the applicatio for the Form 4B. 8.12

5 LAW SOCIETY CONVEYANCING HANDBOOK CHAPTER Please cofirm that the Vedor will submit the duly completed Form 4A to its Ispector of Taxes o a timely basis so as to esure that Form 4B will be available prior to completio. The Sectio 4A authorisatio must be i place i advace of the completio of the lease agreemet, or the date o which occupatio arises, whichever is the earlier, i order to be effective. 5. OTHER LEASEHOLD INTERESTS 5.1 Is the property beig disposed of the subject of leasehold iterests created by the Vedor or its predecessor, or have ay such leasehold iterests previously existed sice 1 November 1972? This requisitio deals with property i which there are existig teats or there have bee previous teacies. The Purchaser will require details of ay such teacies which arise from the gratig of previous taxable supplies as it will determie the status of both future surreders of existig leasehold iterests ad potetial future supplies. Additioally the right to recover iput i relatio to post-lettig expeses will trasfer to the Purchaser. 5.2 Where there are ay able leasehold iterests i the property please cofirm i respect of each such leasehold iterest:- a. The date of creatio of each such lease. b. The date of expiry of the leasehold term. c. The charged (if ay) o the creatio of the lease. d. Whether the teat (or its predecessor i title) of ay leasehold iterest has developed the property (or ay part thereof) withi the meaig of the A 1972 sice 1 November1972. e. Whether the provisios of ay such lease cotai a optio such that the teat may exted the lease period. f. The life of ay such iterests. It is importat for the purchaser to establish these facts i relatio to ay able leasehold iterests i the property. The life of ay such leasehold iterest as referred to i 5.2(f) should be distiguished from the lease period. The life ca be a differet period, such as where the teat etered ito possessio prior to the date of the lease or where a teat has a optio to exted the life of a lease beyod a period of te years. A Purchaser should be aware that a subsequet failure of a teat to exercise a optio of the type referred to i 5.2(e) may give rise to a taxable surreder for the Purchaser. 8.13

6 CHAPTER 8 LAW SOCIETY CONVEYANCING HANDBOOK 5.3 Has there bee ay surreder, abadomet, ejectmet or forfeiture of ay such leasehold iterest? A surreder may i additio to the ormal uderstadig of surreder or abadomet arise where a teat fails to exercise a optio of the type referred to i 5.2(e). This will oly arise where the origial lease period was for less tha te years but the optio period resulted i the life of the lease beig a period of greater tha te years. 5.4 Please give details of ay such evets. It is importat to establish this, as the relevat liability will cotiue with respect to ay future leasehold iterest to be grated i respect of the property by the Purchaser. 5.5 Has there bee ay "developmet" (withi the meaig of the A 1972) subsequet to ay such surreder, abadomet, ejectmet or forfeiture? Where ay such developmet has bee carried out subsequet to ay surreder, abadomet, ejectmet or forfeiture, such developmet will costitute a ew able iterest i the property. For a more detailed treatmet of Value Added Tax o property see the followig: " o Property" by Fergus Gao (5th Editio) published by the Istitute of Taxatio " o Property" by Doal Keedy Law Society CLE Lecture 20 Jue 2000 "The New Rules for o Leases" by Fergus Gao Law Society CLE Lecture 18 Nov 1997 " o Leases" published by the Law Society ad Deloitte ad Touche, October 2000 These publicatios cover the issues regardig o property with particular emphasis o the treatmet of leases. The Coveyacig Committee would like to thak the followig for their assistace i the productio of the Requisitios o Title o ad this Explaatory Memoradum:- Circulated to the professio alog with the ew requisitios o, October 2000 The Requisitios Task Force - Patrick Sweetma, Viviee Bradley ad Deirdre Morris. Greg Lockhart of Matheso Ormsby Pretice. The Probate, Admiistratio & Taxatio Committee especially Des Rooey ad Michael O Coor. Fergus Gao ad Doal Keedy of Deloitte & Touche. 8.14