1.2 The effect an option to tax has This means that no VAT is payable, but the person making the supply cannot normally recover any of the VAT incurred on their own expenses. You do not need to own the land in order to opt to tax.
Is there VAT on option fees?
It has long been the position that the grant of an option to acquire land (a call option) is itself the grant of an interest in land, and therefore usually exempt from VAT unless the grantor has opted to tax the land. The same treatment applies to put options and surrenders of options.
How do I get a copy of my option to tax?
For a copy, go to and enter ‘Notice 742A’ in the search box. For further information phone the VAT Helpline on 0300 200 3700. Use this form if you want to revoke an option to tax land or buildings within 6 months of the date the option took effect.
What is option to tax on property?
The option to tax allows a business to charge VAT on the sale or rental of commercial property, or in other words, to make a taxable supply from what otherwise would be a VAT exempt supply. The option to tax regulations were actually introduced in 1989 so each day more options to tax are eligible for revocation.
Do you pay VAT on residential rent?
The residential rental income is VAT exempt.
Can you claim VAT on residential property expenses?
As a general rule, the letting of residential property is regarded as an exempt supply for VAT purposes. Put simply this means that no output VAT is charged on rents received and VAT on costs cannot be reclaimed.
Can you backdate an option to tax?
The option to tax itself cannot be backdated. Property owners, such as Barratt’s client, who have made or intend to make exempt supplies of a property in the ten-year period before opting to tax, normally require written permission from HMRC (Notice 742a, paragraph 5).
Can a tenant exercise an option to tax?
The option to tax is personal and does not automatically pass with the building. A buyer of an opted property must also exercise the option to tax if it wishes to charge VAT on rent/future sale proceeds.
Can you claim VAT back on residential property?
Can you claim VAT back on refurbishment?
Can you claim a refund from HMRC? The short answer is that it’s between you and your contractor/supplier. If the work is done in the course of a “qualifying renovation” and the services are “relevant services”, the supplier can charge VAT at 5% on services and goods supplied in connection with the services.
Is an option to tax personal?
Is there an option to tax on my building?
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.
