The option to tax 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.
Do I need permission to opt to tax?
Unless the business meets the conditions under which HMRC can grant automatic permission to opt to tax land and buildings, it will be necessary for the business to obtain permission to opt to tax.
Can you opt to tax a leased property?
If you have an interest in commercial property, whether freehold or leasehold, and use it for your own business purposes and do not rent it to others, it is generally unlikely that you will need to consider opting to tax the property.
Is residential property VAT exempt?
All residential letting income is exempt and no associated VAT can be recovered, although in some circumstances if work is undertaken to convert a non-residential property to residential, or renovate a property that has been empty for a number of years, the builder may be able to charge VAT at the reduced rate of 5%.
How do you know if a property is opted to tax?
A good starting point is the age of the commercial building. If it is under 3 years old then it will be in the VAT system and opted to tax. Next, what is the main business activity of the current owner? If they currently charge VAT in their normal course of business, then they are likely to have opted to tax.
Can you deregister a property for VAT?
This means that if you have a property that is less than three years old, which is a standard-rated supply in its own right, or you have opted to tax it, you will need to account for VAT when you deregister. …
Can I revoke an option to tax?
If you change your mind within six months of the effective date of your option to tax, HMRC will allow you to revoke your option to tax if you meet certain conditions. To revoke the option permission must be obtained from HMRC.
Is residential property exempt or zero rated?
The sale and rental of property is normally exempt from VAT with some exceptions. These are the sale of new residential property which is zero-rated and the freehold sale of new (less than 3 years old) commercial property which is standard rated.
Does a property developer have to register for VAT?
Property developers must register for VAT with HM Revenue & Customs (HMRC) when their taxable turnover is more than £83,000. In order to calculate taxable turnover, you should add up the total value of everything you sell in a 12-month period that does not fall into the following categories: … Outside the scope of VAT.
Do landlords need to be VAT registered?
1. The landlord has to be VAT registered, such as a self-employed plumber, market trader or bookkeeper. 2.