We recently purchased a building plot through auction. It was up for sale for quite some time, with planning permission for 6 houses. The price has been drastically reduced, and as such we bought it to build a house for ourselves to live in.
Unbeknown to us, we then received a State of Settlement from the vendors’ solicitors, including a VAT charge, which amounts to a substantial amount! When we received the legal pack, there was no mention of VAT. We would not have bid for the plot had we known that to be the case as it is outwith our financial means. We spoke to HMRC twice, and each time they pointed us to Notice 742A, points 3.1 and 3.7, stating that a seller cannot charge VAT when a plot is bought by a purchaser to build upon and live in.
Our Solicitor advised the vendors’ solicitor of our position, however they have replied that because the land was VAT Registered when they bought it, they had to pay VAT, and that they are exercising their right also to waive the exemption, and thus we therefore have to pay VAT, and in addition, they are willing to extend the date the VAT is paid by us, in order to “allow” us to go and Register for VAT.
Can you advise us further regards this issue? Thank you very much indeed for your help!