Option to tax Gwent : Green & Co

Option to tax

For anyone looking to transact land deals, we provide expert VAT advice on opting to tax, which is a high-risk process due to the high value of land transactions.

Why opt to tax?

The usual reason for opting to tax is to recover input tax, for example:

  • A developer who builds new warehouses and grants long leases could recover the VAT on his construction costs by opting to tax.
  • A landlord who refurbishes an office block may decide to opt to tax to recover the VAT on his refurbishment costs.

Supplies of land and buildings such as freehold sales, leasing or renting are normally exempt from VAT, so no VAT is charged to the purchaser and the seller cannot recover the VAT associated with the costs of the exempt land or building.

To get around this, the seller can 'opt to tax' the land, making the subsequent sale or rental standard rated, subject to a few exceptions, and the associated VAT on expenses will be recoverable.

How we can help

If you are renting, buying or selling commercial or agricultural property, we will help you assess the following:

  • VAT savings - We will assess whether opting to tax is worthwhile for your business, and give an indication of the likely VAT savings.
  • Impact - We will also advise you on the impact that 'opting to tax' might have on prospective tenants or purchasers, as, for example, if financial sector tenants are a possibility, opting to tax might drive down the net rents that could be obtained. This is because such a tenant may not be able to recover all (or any) of the VAT on the rents.
  • Implementation - Should you decide to opt to tax, we can handle the option process on your behalf.

We strongly recommend that you seek advice on opting to tax before you exchange contracts, so please contact us to speak to one of our VAT experts.

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