The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of theoption to tax or election to waive exemption in relation to supply of certain land and property. It should be read in conjunction with thefollowing guidance notes:
Disapplication of theoption to tax ― anti avoidance provisions
Revoking an option to tax
Overview of VAT and property issues
Property transactions where thebusiness cannot opt to tax
Option to tax and VAT group registrations
Recovering input tax on land and property transactions
VATA 1994, Sch 9; VAT Notice 742A; 2006/112/EC, Article 137; VATLP22000
If theland and property transaction will be exempt from VAT under VATA 1994, Sch 9, Group 1, thesupplier may not be able to recover any VAT incurred on any costs associated with theproperty. However, providing certain conditions are satisfied, it is possible for suppliers to 'opt to tax' supplies of land and property. This means that VAT will be charged on all property transactions that would normally be exempt from VAT. This can be beneficial for thesupplier as it will enable them to recover all of theVAT incurred in respect of theproperty.
The ability to recover any VAT charged can be especially important when thesupplier has incurred, or will incur, significant amounts of VAT on:
any refurbishment or improvement works to theproperty
the purchase / lease of theproperty
costs associated with thesale of theproperty
De Voil Indirect Tax Service V7.383
However, a supplier should consider theVAT status of thelessee / purchaser who is likely to lease / purchase theproperty before deciding whether it is appropriate to opt to tax.
For example, a supplier may not want to lease / purchase a property with an option to tax in place, as they cannot recover theVAT charged if theproperty is likely to appeal to:
an insurance company
a financial services company
a school / university
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