What is the 'option to tax'?

The 'option to tax' is an election made to HMRC that allows a landlord to charge VAT on rents and sales of commercial property that would otherwise be exempt. This allows them to recover input VAT on property-related costs.

Is VAT always charged on commercial property sales?

No, most sales of commercial property are exempt from VAT, unless the seller has opted to tax the property, or it is a new commercial property (less than 3 years old).

How does 'option to tax' affect tenants?

If a landlord has opted to tax, they must charge VAT on rent. This increases the tenant's costs, though VAT-registered tenants can usually recover this VAT.

Can I revoke an 'option to tax'?

Yes, an 'option to tax' can be revoked, but there are strict rules and time limits, typically after 20 years. An accountant can advise on the process and implications.

VAT on commercial property

The short answer

Option to tax, VAT on sales and lettings

Price from: £300.00
Time on site: 1 to 2 hours

What you get

A consultation with an accountant to clarify your VAT obligations and strategies for commercial property.

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When do you need a VAT on commercial property?

You need this service when buying, selling, developing, or leasing commercial property in the UK, especially if considering or having already exercised an 'option to tax'.

What happens on the day

The accountant will discuss your commercial property transactions, including purchase, sale, or lease agreements. They will explain VAT rules, the implications of the 'option to tax', and how it affects your financial position.

How to prepare

Details of the commercial property (address, type, age).
Information on any current or past 'option to tax' elections.
Transaction details (sale, purchase, lease agreement).
Records of any previous VAT charges on the property.
Your VAT registration status (if applicable).

How to improve your result

Check the VAT history of the property thoroughly.
Consider the long-term impact before electing to 'option to tax'.
Ensure all legal documents reflect the correct VAT treatment.
Keep clear records of all VAT invoices and claims.

Why it is useful day to day

Correct VAT handling on commercial property prevents costly errors, maximises VAT recovery on expenses, and ensures smooth transactions, safeguarding your investment.

Why we ask these questions

We ask about the nature of the commercial property, your involvement (owner, developer, tenant), and transaction details to provide targeted VAT advice. Understanding your plans helps assess the best VAT strategy.