Commentary

V3.463 Tax incurred prior to an option to tax

Part V3 Supplies, acquisitions and imports

V3.463 Tax incurred prior to an option to tax

Attribution in particular circumstances

V3.463 Tax incurred prior to an option to tax

General

Input tax may become attributable to a taxable supply, rather than to an exempt supply, following the making of an option to tax. For the making of an option to tax, see V4.114–V4.116.

The effect of an option to tax is that the grant or assignment of an interest, right or licence exempted from tax under VATA 1994 Sch 9 Group 1 is normally charged to tax at the standard rate1. To the extent that land or buildings are to be sold, let or licensed, it follows that input tax on the purchase, acquisition or importation of related goods and services will normally be used exclusively in making taxable supplies so that the input tax concerned is wholly allowable under the attribution

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