|HMRC Reference:Notice 701/12 (December 2011)||View Change History|
This notice cancels and replaces Notice 701/12 (January 2002). There are no substantive changes other than to improve the readability of the Notice.
This notice explains which disposals (sales, gifts, reallocations etc.) of assets from historic houses are within the scope of VAT.
No. The assets that you sell from a house used as a private residence are not normally business assets and therefore sales of these are outside the scope of VAT. This also applies to house clearance sales.
If you do this you will be using the house for business purposes. Where you are VAT registered (see paragraph 1.6 of this notice) there is a presumption that any assets (furniture, antiques, works of art etc.) on public display are, for the purposes of VAT, business assets. As such, they will be within the scope of VAT when you dispose of them.
You may, however, choose to treat an asset as a private asset when it is acquired or to take a business asset outside the scope of VAT by reallocating it as a private asset. Further information on this can be found in Section 2 of this notice.
The assets are not treated as business assets because you have not used them for business purposes. You do not need to account for VAT on their disposal.
Yes, if you sell a business asset it is normally liable to VAT at the standard-rate. However, your supply is exempt from VAT when the business asset is:
You can find further information on exemption in Section 3 of this notice.
You will need to register only if the turnover from all your taxable business activities reaches the VAT registration threshold. You can find further information on this in Notice 700/1 Should I be registered for VAT? Exempt income does not count towards the threshold. You are not required to register if you go over the threshold only because of the occasional disposal of a business asset.
Yes. If you acquire assets for both business and private purposes, such as the furnishings of a historic house in which you live, you can choose to keep them as private assets. If you do this you will not be able to deduct any VAT on their acquisition. Where you have treated assets as private assets you need not account for VAT on their disposal.
You should contact the VAT Helpline and provide the relevant information.
You should show us that you no longer use the asset for any business purpose. This can involve moving it to another part of the house used for private purposes only. You should inform the VAT Helpline when you decide to withdraw a business asset from the business and advise them of the details.
If you were entitled to some deduction of input tax on acquisition of the asset then you will need to pay VAT when you reallocate it as a private asset. The taxable amount will be the amount:
Where the asset was not chargeable with VAT when acquired (such as an inherited asset) no VAT is due on the reallocation. When a reallocated asset is subsequently sold the sale is of a private asset and, as such, is not liable to VAT.
This might arise, for example, where you buy a frame for a painting that you have inherited and recover input tax on it. At any time that the painting is reallocated as a private asset VAT will be payable on the frame, based on the value as calculated in paragraph 2.4. VAT is not due on the inherited painting as no VAT had been incurred at the time of its acquisition.
If you dispose of a business asset it is exempt from VAT if the disposal is either:
This is a privately arranged sale to bodies, such as the UK National Museums and Galleries and the National Art Collections Fund. These bodies are allowed to buy objects by private treaty in accordance with the relevant legislative provisions.
This allows a person who is liable to pay inheritance tax, capital transfer tax or estate duty to settle part, or all of the debt, by disposing of a work of art or other object to HM Revenue & Customs.
To qualify for exemption, an object must be of national, scientific, historic or architectural interest. These are often antiques, works of art etc. You can find further information about the capital tax provisions in the guidance on Capital Taxation and the National Heritage.
You should get a letter from the Capital Taxes Office confirming that the private treaty sale, disposal otherwise than by sale, or acceptance in lieu, is exempt from capital taxes.
If you make a private treaty sale, the value of your exempt supply is the amount you actually receive for the object.
If you make a disposal otherwise than by sale, the value of your exempt supply will be the amount:
If an object is accepted in lieu, the value of your exempt supply is the amount of estate duty, capital transfer tax or inheritance tax actually satisfied.
No. If you are a VAT registered person who chooses to treat an asset, used for both business and non-business or private purposes, as a private asset you will not be able to deduct VAT as input tax when you complete your VAT return.
If you use a private asset for both business and other purposes then you may claim back VAT as input tax on repair or maintenance services. Any claim must be in proportion to the extent the asset is used for business purposes (subject to the normal provisions concerning evidence and partial exemption). You can find further information in Notice 700 The VAT Guide and Notice 706 Partial Exemption. The recovery of input tax on such services does not make the future disposal of the asset itself liable to VAT.
You can deduct, as input tax, VAT charged on costs that you use or intend to use in making taxable supplies. You cannot normally deduct input tax charged on costs that relate to your exempt supplies. If your input tax relates to both taxable and exempt supplies, you can normally deduct only the amount of input tax that relates to your taxable supplies. You can find further information in Notice 706 Partial Exemption.
No. You cannot deduct, as input tax, VAT incurred in selling or otherwise disposing of private assets.
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