Option to tax
Whether an option is appropriate and how it affects future supplies.
Property VAT depends on the transaction, the property and the parties. Commercial rents, sales, development, conversions, options to tax and transfers of going concerns can all produce very different outcomes.
VAT should be reviewed before exchange, the grant of a lease or major development expenditure where possible. An option to tax can affect years of future transactions.
Give us the property use, proposed transaction and expected date.
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The supply must be identified before deciding whether it is exempt, taxable, zero-rated or subject to another special rule.
An option to tax, development intention or TOGC analysis can materially change the cash cost and recovery of VAT. These issues are harder to repair after completion.
Property VAT is transaction-specific, so the engagement is built around the actual land, building and intended supply.
Whether an option is appropriate and how it affects future supplies.
VAT on sales, leases, rents and service arrangements.
VAT recovery and supply treatment during development projects.
Zero or reduced-rate treatment where statutory conditions apply.
TOGC treatment on qualifying property businesses.
Recovery and partial-exemption consequences of property activity.
Use, age and transaction are established.
Existing options and prior VAT recovery are considered.
The proposed sale, lease or development is analysed.
Advice and required notifications are scoped and implemented.
Many supplies of land and buildings are exempt by default, but an option to tax can make relevant supplies taxable, subject to statutory exclusions and disapplication rules.
Opting can improve input-VAT recovery, but it can also increase the VAT cost for exempt or partly exempt buyers and tenants. The commercial effect should be considered alongside the tax rules.
Official VAT rules for land, buildings and opting to tax.
VAT Notice 742A ↗VAT rules for construction and relevant property work.
VAT Notice 708 ↗No. Commercial property supplies are often exempt unless the property is opted to tax or another taxable rule applies.
It depends on the property, intended transactions, input VAT and customers. The long-term consequences should be reviewed before opting.
Potentially, but recovery depends on the intended taxable supplies and any restrictions.
A qualifying transfer of a property business can potentially be treated as a transfer of a going concern, subject to detailed conditions.
There are limited revocation routes, including a route after more than 20 years where the statutory conditions are satisfied.
Yes for non-standard transactions. VAT can affect the purchase price, funding and contractual drafting.