VAT on property sales

[Camrei]

Hi
I recently lost a lot of money by purchasing a residential property in a CC registered for residential and industrial property letting. I had to sell soon after and ended paying VAT on the sale which was obviously more than the purchase transfer duty. The difference was out of my pocket. I am now looking at at further investments and was wondering if the transfer duties could be regarded a company expense and come directly off your profits? Please advise.

Regards Camrei

[garthu]

Hi Camrei, not 100% if i have the q right but if you buy into the same VAT registered CC, the option for transfer duty OR VAt is not an option, VAT is automatic. If you buy into another name, private name for instance, yes you will pay transfer duty, but then you loose benefits also (but thats for a tax accountant). What you are able to do is "rent" the property to the company as an indiviual.

The advantages of buying into CC were sorted out by SARS a while ago and pretty much gone. A trust (which comes with hectic tax implications if your accountant does not know how to handle this) is a way for alot of the big guys... but be careful with that... get advice from the right guys there!

[garthu]

Having read it again, get an accountant to look at it also, you might be able to claim VAT back. The transfer duty cant do much about, but you claim attorneys costs, fees, costs of the property etc which we have done in the past...

You need to find an accountant with lots of tax/property experience or investor

[Camrei]

Interesting

Thanx for the quick response. Yes the idea is to purchase new properties, in a CC or trust. ( trusts do seem very expensive overall) From there I would like to let the properties to generate income. Now I know that you can't claim the VAT/transfer duty on a property used for residential letting, but would the transfer duty be regarded as an expense of the CC and thus come the off profits which would be taxed?
What I did find interesting was the idea of renting your property as an individual to the CC. Could you then use the property in the CC as if it was owned by the CC?

Thanx Camrei

[garthu]

Hi Camrei,

Not certain about either, but dont think so for either and would honestly suggest speaking to someone extensive tax experience on property. Don't want to give the wrong advice here as being wrong is expensive with property!

What i did notice when we exited property was that investors had pulled away from CC and either bought in individual capacity but more often trust. The thing with trust is that the initial expense/tax implications are heavy, but the final benefits were worth it. From what i learnt from one investor, you will be amazed at what expenses can be run through a trust that is correctly set up - kids expenses, holiday etc.

You need to find someone who has serious trust experience, take the issues on hand to them and let them lay it out for you. By the way, an incorrectly set up and worded trust is even worse than the CC issues you had!

[Camrei]

Sub-letting

Hi Garth

Will definitely take a closer look at trusts. So as you mentioned previously, what would the reason be for renting a property to a company? Could the company then sub-let the property?

Regards