Overview of the option to tax

Produced by Tolley
Overview of the option to tax

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

  • Overview of the option to tax
  • What land and property is covered by the option to tax?
  • Land that is opted to tax
  • Buildings that are opted to tax
  • Properties opted before 1 March 1995
  • Notifying or applying for an option to tax
  • Notifying or applying for an option to tax
  • Belated notification of an option to tax
  • Who needs to opt to tax?
  • Beneficial owners
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the option to tax or election to waive exemption in relation to supply of certain land and property. It should be read in conjunction with the following guidance notes:

  1. Disapplication of the option to tax ― anti avoidance provisions

  2. Revoking an option to tax

  3. Overview of VAT and property issues

  4. Property transactions where the business cannot opt to tax

  5. Option to tax and VAT group registrations

  6. Recovering input tax on land and property transactions

Note that HMRC has made some temporary changes to notifying an option to tax during the COVID-19 (coronavirus) outbreak (notably extending the deadline for notification from 30 to 90 days). For more details see the Coronavirus (COVID-19) and VAT - further VAT consequences guidance note.

VATA 1994, Sch 9; VAT Notice 742A; 2006/112/EC, Article 137; VATLP22000

If the land and property transaction will be exempt from VAT under VATA 1994, Sch 9, Group 1, the supplier may not be able to recover any VAT incurred on any costs associated with the property. 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 the supplier as it will enable them to recover all of the VAT incurred in respect of the property.

The ability to recover any VAT charged can be especially important when the supplier has incurred, or

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