VAT Advice

It is crucial that any business which rents out commercial and/or agricultural property considers the possibility of ‘opting to tax’. Caroline Bason, Head of the Carter Jonas Client Accounting Team explains more...

 

 

In order to minimize the cost of irrecoverable VAT, i.e. input VAT which cannot be recovered, it is crucial that businesses which rent out commercial and agricultural property consider the possibility of ‘opting to tax’. Essentially this means that supplies of land and property, which are in most cases exempt from VAT, become chargeable to VAT, which in turn means that VAT can then be recovered on costs incurred.

The option to tax procedure is only available to agricultural and commercial properties; residential properties cannot be opted. Although a whole estate may be subject to an option to tax, it is the individual properties that are notified to HM Revenue and Customs and therefore it is possible to opt properties selectively within a portfolio.

Once in place the option to tax lasts for 20 years and cannot be revoked within this time period. Care therefore needs to be taken when deciding which properties to opt as should one be sold within this timeframe, VAT will be chargeable on the sale in most cases.

Carter Jonas'Client Accounting Team can help by providing an initial assessment of whether it is worthwhile opting to tax a property portfolio, or part thereof, and give an indication of the likely VAT savings. Should the decision to opt be taken, Carter Jonas can complete the option process on behalf of the client.