Andrew Needham looks at the effects of demolishing or extending an existing commercial property which has been opted to tax.
In most cases, the sale or rental of a commercial property is exempt from VAT and therefore a business cannot recover the VAT on its construction, refurbishment or maintenance.
However, HMRC allows businesses to opt to tax such properties; when they do this, they have to charge VAT on the lease, rental or sale of the properties and in turn, they can reclaim the VAT on costs relating to the opted property.
Demolishing an opted property
It is common for businesses to demolish older buildings with the intention of either selling the bare land or building a new commercial property. But what happens if the business has opted the building which now no longer exists?
The current position is that when a business opts to tax a
