Selling/Letting a Commercial Property – Have you opted to tax?
Opting to Tax
Have you opted to tax? If you own a commercial property and look to sell or rent it out , you are almost certainly going to be asked this question by a buyer/tenant. Your answer will usually (subject to exceptions and rules) determine whether VAT at the standard rate will be payable on either the purchase price, the annual rent and service charge (if any) and other input tax, in accordance with Part 1 of Schedule 10 of the Value Added Tax Act 1994. Put simply, both parties need to know this to make sure they pay the correct amount of tax.
If you have opted to tax the property, it is important to know what information you will be required to provide to a proposed buyer/tenant early on to avoid any delay when you are selling or letting out a property
The best document you can produce is an Acknowledgement of Option to Tax (sometimes called an Election to Waive the VAT Exemption) by HMRC, which will confirm that you have opted to tax from an effective date. The Acknowledgment will detail the full address of the property(ies) and will be adequate proof to the buyer/tenant that VAT is payable. Keep your Acknowledgment safe!
At the time of writing, there is not a central register of properties that have opted to tax, so if you cannot find your Acknowledgment then you should contact the HMRC Option to Tax Unit and request they re-send the Acknowledgment.
optiontotaxnationalunit@hmrc.gov.uk
0300 200 3700
HMRC Option to Tax National Unit
123 Vincent Street
Glasgow, G2 5EA
Unfortunately, it can take some time for HMRC to reply to option to tax requests andwe are happy to discuss the other options available to you as part of the sale/letting process.
Likewise, HMRC holds very little records of options to tax prior to 2003, so if you believe your effective date is before this we can again assist and ensure the buyer/tenant has the information they require.
Senior Commercial Property Solicitor Russell Dowling
Lawson West Solicitors, Leicester
If you are looking to sell or let your property, whether you have opted to tax or not, or are buying or looking to rent a property, please do let us know and we would be more than happy to assist with your transaction.
[Tax-specific advice is not our specialty, and we are not qualified to advise whether you should or should not opt to tax a property. This something you should discuss with an accountant if you would like further information. We are happy to provide the details of local accountants, if necessary.]
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