The following Tax guidance note Produced in partnership with Martin Scammell provides comprehensive and up to date legal information covering:
This Practice Note is about VAT issues to consider on the assignment or termination of a lease.
In this Practice Note, unless stated otherwise, termination means any form of termination of a lease, including surrender, exercising an option to break, forfeiture and disclaimer on insolvency.
VAT will be chargeable on an assignment or termination of a lease for consideration if the seller (ie the departing tenant) has opted to tax, unless:
the option is disapplied because of the type of property or its intended use (see Practice Note: Option to tax—disapplication for residential and other property)
the option is disapplied under anti-avoidance rules (see Practice Note: Option to tax—disapplication under anti-avoidance rules), or
it is a VAT-free transfer of a going concern (TOGC) (see Practice Note: Transfers of a going concern involving land and buildings)
If the seller has not opted to tax, an assignment or termination for consideration will be exempt unless:
the property is such that mandatory standard-rating applies (see Practice Note: Exclusions from the exemption from VAT for land and buildings)
the supply is zero-rated—zero rating applies in certain circumstances to:
some categories of residential and charitable buildings, and
the supply is standard-rated under rules for buildings that were completed before 1 March 2011 and were originally zero-rated as
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