VAT on property acquisitions

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • VAT on property acquisitions
  • Territorial scope
  • New build eligible property
  • Non-new eligible property
  • Protected buildings
  • Commercial property
  • Rental income
  • Option to tax
  • Construction services liable to VAT at the reduced rate
  • Other aspects

The VAT treatment and considerations in relation to a property purchase depend on the type of property and whether the vendor has elected to waive his VAT exemption or ‘opt to tax’ as it is more commonly known.

This guidance note is intended to provide an overview of these considerations. A good summary can also be found in the Overview of VAT and property issues guidance note (subscription sensitive).

Territorial scope

For property situated abroad, the place of supply of the property transaction (and of any work on the property, such as conveyancing, etc) will be outside of the UK. This will therefore be outside of the scope of UK VAT, although there may of course be local VAT considerations and advice should be sought from a local VAT specialist.

For property that is situated in the UK, the UK VAT position will need to be considered. This will depend primarily on the nature of the property.

New build eligible property

For the investor purchasing a newly built eligible property, their purchase will be zero-rated for VAT purposes. This means that the developer who has sold the property will not charge any VAT on the sale, although they will be in a position to reclaim back the VAT they have incurred on their build costs (with a few specific exceptions). Note that ‘new’ in this context means the first grant of a major interest in an eligible property by the person who has constructed it.

An eligible property is:

  • an eligible dwelling
  • a building that will be used for solely relevant residential purposes
  • a building that will be used for solely relevant charitable purposes

If the property will be used solely for a

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