{"id":32047,"date":"2016-04-15T14:42:41","date_gmt":"2016-04-15T14:42:41","guid":{"rendered":"https:\/\/www.constablevat.com\/?p=32047"},"modified":"2016-04-15T14:42:41","modified_gmt":"2016-04-15T14:42:41","slug":"blog-opted-tax","status":"publish","type":"post","link":"https:\/\/www.constablevat.com\/blog-opted-tax\/","title":{"rendered":"CVC Blog – Should you have opted to tax?"},"content":{"rendered":"

There are many VAT issues and points to consider in relation to transactions involving land. \u00a0One area where CVC receives many questions is around the question of notifying the \u2018option to tax\u2019. The grant of any interest in, or right over, land is usually an exempt supply for VAT purposes. The option to tax provisions allow for a person to tax certain supplies of land which would otherwise be VAT exempt.<\/p>\n

Whilst many of the questions raised by businesses relate to whether they are being charged VAT correctly on a transaction, one point that is often overlooked is whether steps need to be taken, in advance of the transaction taking place,<\/u> to ensure that any VAT that is charged can be reclaimed?<\/p>\n

It is often assumed that the VAT liability of land for one person is the same for another. We regularly come across cases where businesses are operating on the basis that they are required to charge VAT on the lease or sale of a property because they were charged VAT on the initial purchase as it was opted to tax by the previous owner. There is an assumption that the seller\u2019s option to tax passes to the purchaser and as a result the new owner has not notified an option to tax to HMRC. This usually only comes to light when a tenant or potential purchaser then requests to see a copy of the new owner\u2019s option to tax acknowledgement from HMRC and the failure to notify an option can have significant consequences as regards recovery of input VAT incurred on the original purchase.<\/p>\n

Each person acquiring an interest in land must consider whether they can or would wish to opt to tax the land.<\/p>\n

There are two stages in opting to tax a property<\/p>\n

    \n
  1. Making the decision to opt which may take place at a board meeting or similar, or less formally.<\/li>\n<\/ol>\n
      \n
    1. Notifying HMRC of the decision. An option to tax has effect only if<\/li>\n<\/ol>\n