The challenges were clear for developers facing the prospect of transforming a landmark building with important historical value - but it was plain saying when it came to an aspect of the finance involved in the deal.
This was the case thanks to VAT lender Bloomsmith who granted a loan of nearly £700,000 which covered the 20 per cent of purchase price VAT on the cost price of nearly £3,400,000.
The Bloomsmith client had identified an old building in a bustling part of Northern Ireland with great potential for renovation, in order to provide accommodation. Planning permission had already been granted, but the process had been ongoing for a number of years and final completion was at the forefront of the mind of all parties involved.
A Bloomsmith spokesman takes up the story: "In early 2018 we were approached by a client who we had already helped previously. They came to speak with us about a new project they were undertaking.
"The building in question held great historical value, having been owned by a government body and preserved for hundreds of years, and even contains a museum on the grounds.
"However, the larger building was uninhabitable and so served only as a landmark, but without any direct function or benefit to the public. The planning permission granted would ensure that the soul of the building would remain, whilst making it a functioning space once more, as well as a historical landmark in Northern Ireland."
The client was experienced in the purchasing and development of large-scale properties and it was clear to Bloomsmith that they would make a great success of this venture.
"BloomSmith were eager to help in this exciting development to rejuvenate a landmark and make it once again of great benefit to those living in the Northern Irish city.
"The loan allowed the purchase to complete and the project to finally get underway. The money was transferred speedily, allowing the client to focus on arranging all of the other details, knowing that the commercial VAT was taken care of. We look forward to seeing what becomes of the project and are excited to work on similar projects with this client in the future.
"This was BloomSmith’s third transaction in Northern Ireland proving yet again our commitment to the entire UK market."
Bloomsmith believe cash flow is vital and are only too aware that the VAT liable on a property purchase is a major consideration for purchasers. "Mortgage banks do not normally offer loans over 60 per cent LTV which means that 40 per cent in equity is required, as well as standard acquisition costs ranging from between 5 and 7 per cent.
"On top of these outlays, the purchaser has to provide a further 20 per cent for the VAT, payable on completion. This additional, sometimes overlooked, cost can pose a significant problem – which jeopardises the deal.
"Although the VAT is later recovered from HMRC, reclaiming the money can take up to three or four months, devastating cash flow for the buyer."