The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The majority of businesses that make exempt supplies (ie insurance, healthcare, education, finance, etc) are not entitled to recover all of the VAT incurred on costs associated with their VAT exempt business activities. For these types of businesses, VAT incurred on costs associated with land and property transactions represents a significant irrecoverable cost.
As a result, a number of property VAT planning arrangements were implemented by VAT exempt organisations to reduce the irrecoverable VAT incurred. HMRC became aware of the significant VAT 'loss' incurred due to the implementation of these types of property 'VAT avoidance' arrangements.
As a result, HMRC introduced anti-avoidance provisions with effect from 10 March 1999 which enabled HMRC to automatically disapply the option to tax in certain situations. There have been a number of revisions to the law since it was introduced and this note provides an overview of the latest provisions.
If a business grants an interest in land and buildings, and the business that will occupy the land and buildings makes wholly or mainly taxable supplies, and can recover all or most of the VAT incurred on costs, the transaction will not be affected by the anti-avoidance measures described below.
The anti-avoidance measures will affect the following types of transactions (this list is not exhaustive):
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