Value Added Tax

Option to tax ― what is covered by an option?

Produced by Tolley
  • 19 Jan 2022 07:02

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Option to tax ― what is covered by an option?
  • What is the scope of an option to tax?
  • What is the extent of a building for the purposes of an option?
  • When are buildings linked for the purposes of an option?
  • Are buildings still covered by an option when changes are made to them?
  • Will a new building on opted land automatically be subject to the option to tax?
  • What kinds of supplies are not affected by an option to tax?
  • Supplies of dwellings, RRP and RCP buildings
  • Supplies of buildings for conversion into dwellings or for an RRP
  • Land sold to a relevant housing association
  • More...

Option to tax ― what is covered by an option?

This guidance note discusses what is covered by an option to tax. It also describes when supplies will not be affected by an option to tax.

For an overview of the option to tax more broadly, see the Option to tax ― overview guidance note.

For in-depth commentary on the legislation and case law around the option to tax, see De Voil Indirect Tax Service V4.115C.

What is the scope of an option to tax?

An option to tax has effect over the land or a building which is specified in the option.

When a person opts to tax a building, the option will continue to apply to the land on which the building stood if the building is demolished and any future buildings which are constructed on the land. In other words, the option has effect over the whole of the building (it is not possible to opt just part of the building) and all the land within its ‘curtilage’ (which is the land immediately around the building including, for example, forecourts and yards).

Where a person opts to tax land (but not by reference to a building or part of a building), the option to tax will also apply to any buildings on the land and to future buildings constructed on the land.

However, it is possible to specifically exclude new buildings from the effect of an option despite the rules set out above (this is described in more detail below).


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