Commentary

V4.115 Land subject to an option to tax—effect, and meaning of 'relevant associate'

Part V4 Exemption, zero-rating and reduced rates

V4.115 Land subject to an option to tax—effect, and meaning of 'relevant associate'

V4.115 Land subject to an option to tax—effect, and meaning of 'relevant associate'

Review of the option to tax

On 2 December 2004, HMRC announced1 a three-month consultation period in relation to a review of the option to tax.

The outcome of the consultation was announced on 5 December 20052. The necessary legislation was brought into force by Treasury Order3, effective from 1 June 2008. Provisions are made for the continuity of the law in connection with the revised legislation, and in respect of actions undertaken prior to that date4.

Details of the provisions effective from 1 June 2008 are set out in V4.116.

Effect of the option to tax

A grant in relation to land, which would otherwise fall to be treated as exempt under VATA 1994, Sch 9, Group 1, does not fall to be so treated (and is therefore taxable) if5:

  1.  

    •     the grant is made by a person ('the opter') who has exercised the option to tax over the land, or

  2.  

    •     where the opter is a body corporate, the grant is made by a 'relevant associate' of that person, and

  3.  

    •     the grant is made at a time when the option has effect in respect of that land

Where an option is exercised subsequent to the granting of a right over land, any supplies

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