0191 257 0355

71 Howard Street, North Shields
Tyne & Wear, NE30 1AF


VAT - option to tax

Source: HM Revenue & Customs | | 10/10/2018

There are special VAT rules that allow businesses to standard rate the supply of most non-residential and commercial land and buildings (known as the option to tax). This means that subsequent supplies by the person making the option to tax will be subject to VAT at the standard rate.

The ability to convert the treatment of VAT exempt land and buildings to taxable can have many benefits. The main benefit is that the person making the option to tax will be able to recover VAT on costs (subject to the usual rules) associated with the property including the purchase and refurbishment of the property.

However, any subsequent sale or rental of the property will attract VAT. Where the purchaser or tenant is able recover the VAT charged this is not normally an issue. However, where the purchaser / tenant is not VAT registered or not fully taxable (such as bank) the VAT can become an additional (non-recoverable) cost. Once an option to tax has been made it can only be revoked under limited circumstances, for example:

  • within a 6 month 'cooling off' period,
  • an automatic revocation where no interest has been held for more than 6 years and after 20 years has elapsed.

There are strict rules and conditions which must be met for all these revocations.

Proper consideration of the various issues is important prior to making an election.

 

Latest News

  • Gifts out of disposable income

    12/02/2019 - More...

    There is an annual Inheritance Tax exemption of £3,000 for gifts. This exemption can also be carried forward to the following tax year if not used to make a maximum gift of £6,000.

  • What work is covered by the CIS scheme?

    12/02/2019 - More...

    The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction

  • When do you pay Capital Gains Tax?

    12/02/2019 - More...

    Capital Gains Tax (CGT) is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. However, if you only pay basic rate tax and

Newsletter

With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login

Copyright © 2019 - Read Milburn