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VAT - option to tax

Source: HM Revenue & Customs | 11/10/18

There are special VAT rules that allow businesses to standard rate the supply of most non-residential and commercial land and buildings (known as the option to tax). This means that subsequent supplies by the person making the option to tax will be subject to VAT at the standard rate.

The ability to convert the treatment of VAT exempt land and buildings to taxable can have many benefits. The main benefit is that the person making the option to tax will be able to recover VAT on costs (subject to the usual rules) associated with the property including the purchase and refurbishment of the property.

However, any subsequent sale or rental of the property will attract VAT. Where the purchaser or tenant is able recover the VAT charged this is not normally an issue. However, where the purchaser / tenant is not VAT registered or not fully taxable (such as bank) the VAT can become an additional (non-recoverable) cost. Once an option to tax has been made it can only be revoked under limited circumstances, for example:

  • within a 6 month 'cooling off' period,
  • an automatic revocation where no interest has been held for more than 6 years and after 20 years has elapsed.

There are strict rules and conditions which must be met for all these revocations.

Proper consideration of the various issues is important prior to making an election.

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Some accountancy websites also provide pages and pages of tax information, helpsheets, etc. We prefer to give clients personally tailored advice. So, if you want details of tax rates and allowances just go to the HMRC website on which you should find what you’re looking for. If you need more individual advice please contact us.

Below are links to websites you may find of interest, but as we like to support our local community and clients, we have included links to websites that may be of interest:

HMRC

FT

BBC

VEALE WASBROUGH VIZARDS

CESP

PRACTICE INDEX

SIMCOMM ACADEMY

More Local:

FOOTPLATE EXPERIENCE

ANGLEBURY PRESS

OFFCAMBER.CO.UK

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Sandisons is the trading name of Sandisons Limited. Registered office: Badger House, Salisbury Road, Blandford Forum, Dorset DT11 7QD.  Co. Reg. No. 05068291

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