17. Law of Property Act
How to account for and pay any VAT due when you sell property assets.
When a receiver is appointed under the Law of Property Act, the receiver is unable to register separately for VAT as they’re appointed under a legal charge and are deemed to be the agent of the VAT-registered business. This business retains responsibility for:
- its own VAT registration
- all taxable supplies made
Expenditure incurred by either the business or the receiver must be accounted for on the ‘VAT Return for the business’ registration.
You should ask the VAT office which controlled the business to confirm if an option to tax has been taken out on the land or building.
You will need to supply a valid VAT registration number to obtain this information and if the business has opted to tax, any supplies of the land or building will normally be standard rated.
You can find more information in Opting to tax land and buildings (Notice 742A).
We consider that:
Law of Property Act receivers making third party payments to us in respect of the management of specific properties are discharging their obligations under the Law of Property Act. This obligation is limited to accounting only for the net amount that would be due from the borrower.
It is therefore acceptable for receivers to calculate that net amount by reference to any VAT credit that the borrower is entitled to claim in connection with the supply. But, as the payment made on account by these receivers is simply made on behalf of a borrower, the borrower is still obliged to submit a VAT Return stating their liability, including the credit for any input tax.
In VAT account terms, the borrower must then pay the amount owed, taking into account anything already paid by the receiver.
The Law of Property Act receiver should account for the net tax calculated by means of form VAT 833.
The Law of Property Act receiver’s duty in relation to VAT is limited to accounting for tax received. It is not part of the receiver’s obligations under the Law of Property Act to obtain repayments of VAT in connection with the property. The receiver has no legal right, under either the Law of Property Act or VAT legislation, to make such a claim. While we accept that the receiver can reduce the amount of VAT to be accounted for by setting off any VAT credit that the borrower is entitled to claim in respect of that supply, if this results in a repayment claim then it is the responsibility of the borrower to claim on their VAT Return.
If assets are sold, then the VAT due must be accounted for and paid to us using form VAT 833. The business’ VAT registration number should be used on sales invoices and quoted on form VAT 833.
Payment may be made electronically, with the exception of card payments using the online or phone payment service and online direct debit.
Use these details:
- sort code — 08 32 00
- account number — 12000903
- account name — CITI MISC
For the reference, use ‘CAT2 V833’, followed by the VAT registration number.
Law of Property Act receivers cannot make a separate claim for the input tax which should properly be claimed through the trader’s VAT Return.