Andrew Needham looks at the VAT liability of land and property transactions, asks why a business would decide to opt to tax, and considers what the benefits are.
The sale and rental of property is normally exempt from VAT (under VATA 1994, Sch 9, Gp 1). There are some exceptions to this; these are the sale of new residential property, which is zero-rated and the freehold sale of new (i.e., less than three years old) commercial property, which is standard-rated.
The option to tax (under VATA 1994, Sch 10) allows a business to choose to charge VAT on the sale or rental of commercial property (i.e., to make a taxable supply out of what otherwise would be an exempt supply). Any option to tax does not affect a residential building or residential part of a building.
Why would you want to opt to tax?
The key to this is the ability to recover VAT on related
