The main benefit of opting to tax a commercial property is the ability to recover input VAT on associated costs. Businesses that are using the commercial property as their trading premises, and are making taxable supplies in the course of their business, should be able to reclaim all input VAT in any case.
Do you have to opt to tax commercial property?
Most businesses do not need to opt to tax their trading premises – they are using them for making taxable supplies in their normal business. You only need to consider opting to tax if renting property or selling your trading premises in certain circumstances.
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.
Do I have to pay VAT on commercial property?
VAT exemption on commercial property
As a general rule, the sale or lease of a commercial property is exempt from VAT, which means neither a purchaser nor a tenant would have to pay VAT.
How do I avoid paying VAT on commercial property?
If you are buying an opted commercial property, you can avoid paying VAT if you can obtain TOGC status for it by having a tenant in place and being registered for VAT and opting to tax it at the time of the sale.
How do I 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 a tenant opt to tax a property?
Opting to tax a property which you are renting out may limit the potential tenants. … You should note that once you have opted to tax a commercial property, the option cannot be revoked, subject to a six month cooling off period.
Can you remove an option to tax?
The option to tax can only be revoked in very limited circumstances: within a 6 month cooling off period providing no input tax has been claimed or output tax charged; it is automatically revoked if the ‘opter’ has no interest in the property after 6 years. … 20 years after you exercised the option to tax.
What is a VAT 5L?
A VAT property questionnaire (VAT 5L) is required every a business involved in land, property or construction services registers for VAT. … The VAT 5L form is part of the application process and is completed online and printed for the client’s approval.
Can you 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.
Can a commercial property be sold as a going concern?
Generally the sale of a commercial building attracts Goods and Services Tax (GST) on the sale price. However, GST is avoided if the commercial property is sold as a “going concern”. … the business is carried on, up until the day of sale.
Can I claim VAT back on commercial property?
As a general rule, the letting or selling of commercial property is generally exempt from VAT, which means you do not have to pay VAT on the purchase price. If you are running a VAT registered business, you can reclaim VAT – this includes office space, industrial or retail units.
Can you opt to tax bare land?
You do not need to own the land in order to opt to tax. Once you have opted to tax all the supplies you make of your interest in the land or buildings will normally be standard-rated, and you will normally be able to recover any VAT you incur in making those supplies.
Is commercial rent zero rated or exempt?
The sale or lease of a commercial property can be standard rated, zero rated, exempt or even outside the scope of VAT depending on its nature. Commercial properties can be used for various purposes such as: … lease and capital appreciation. to develop and sell.