The option to tax land and buildings
Produced in partnership with Martin Scammell

The following Tax practice note produced in partnership with Martin Scammell provides comprehensive and up to date legal information covering:

  • The option to tax land and buildings
  • Why does this matter?
  • Where is the option relevant?
  • Terminology
  • Legislation
  • The person opting
  • VAT groups
  • Partnerships and trusts
  • Death and insolvency
  • The scope of the option
  • More...

The option to tax land and buildings

This Practice Note is about the option to tax land and buildings. It considers the person by whom the option is exercised, the scope of the option, the exercise and notification of the option, its various implications, the circumstances where it can be revoked and the advantages and disadvantages of opting.

For cases where the option is specifically disapplied, see Practice Notes: Option to tax—disapplication for residential and other property and Option to tax—disapplication under anti-avoidance rules.

Why does this matter?

The default position is that property transactions are VAT-exempt (see Practice Note: Exemption from VAT for land and buildings), so that no VAT is charged and related input tax cannot be recovered. The option generally means that transactions become taxable and input tax becomes recoverable. In practice, most commercial properties are subject to an option to tax.

In principle, if the owner of a property has opted, the option then applies to all their dealings in it. So, for example, if they have opted to tax lettings, the option also applies on a disposal of the property.

In most cases it is essential to know whether or not the option has been exercised, because this will determine whether VAT needs to be charged or whether further issues need to be considered. In particular, it usually means that there are further conditions for

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