Commentary

V7.385 Situations when the option to tax is not applied

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.385 Situations when the option to tax is not applied

Part V7 Tax planning | Commentary

V7.385 Situations when the option to tax is not applied

There are certain situations when an option to tax arrangement is overridden, ie the sale of the interest in the land or property or rental received will be exempt rather than standard rated (even though the property owner has exercised an option to tax). See V7.388 for new certification procedures now required in many cases. The main situations when the override would apply are as follows.

  1.  

    •     Dwellings – any supply in relation to a building (or part of a building) intended for use as a dwelling or a number of dwellings or solely for a 'relevant residential purpose'. If an opted building is being sold and converted into dwellings by the buyer, the latter must complete Form VAT 1614D and give it to the seller before the price of the deal is legally fixed (usually before exchange of contracts). This means the sale of the building will then be exempt rather than standard-rated. However, this may present some input tax problems for the seller – hence the need for VAT 1614D to be issued before exchange of contracts. If the form is issued after this time, the seller can reject the request to override the exemption if he wishes.

  2.  

    Example – pub being converted into flats (dwelling); pub being used as a nursing home (ie for a 'relevant residential purpose').

  3.  

    Comment – an option to tax election is always made on land, and then applies to any building that

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