Property transactions where the business cannot opt to tax

Produced by Tolley

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

  • Property transactions where the business cannot opt to tax
  • What property transactions are not subject to the option to tax?
  • Dwellings
  • Designed or adapted and intended to be used as a dwelling or number of dwellings
  • Buildings converted into dwellings
  • Relevant residential purpose
  • Buildings converted into relevant residential purpose properties
  • Relevant intermediaries
  • Relevant charitable purpose
  • Relevant housing association
  • More...

Property transactions where the business cannot opt to tax

This guidance note covers situations in which a business is not entitled to opt to tax.

What property transactions are not subject to the option to tax?

The table below provides an overview of the types of property transaction where the business is not entitled to opt to tax. If it does opt to tax, the supply will remain exempt from VAT because the option to tax will not be valid.

It should also be noted that HMRC have also introduced some anti-avoidance provisions which ‘disapply’ the option to tax in certain situations. Further information on the disapplication of the option to tax under the anti-avoidance provisions can be found in the Disapplication of the option to tax ― anti avoidance provisions guidance note.

Type of property transactionCertificate required?
Buildings designed or adapted and intended for use as a dwellingNo certificate is required. It would be prudent for the business to keep evidence of the intended use of the property to support the fact that the option to tax is not applicable to the transaction
Buildings designed or adapted and intended for use as a relevant residential purposeNo certificate is required. The tenant or purchaser must inform the supplier of the intended use of the property. The supplier should keep evidence that the property will be used for a relevant residential purpose. Please see the Construction ― zero-rating of construction services guidance note
Buildings to be converted into dwellings or used for a relevant residential purposeThe supplier should be issued with a certificate by the recipient. The certificate is a VAT1614D.
Please see the Sale or grant of a long lease ― zero-rating for newly converted buildings guidance note for more information
Buildings intended for use for a relevant charitable purposeNo certificate is required. The tenant or purchaser must inform the supplier of the intended use of the property. The supplier should keep evidence that the property

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