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VAT Opting to Tax on Buildings

Sep17

Buildings are generally exempt from VAT, but there are a lot of exceptions to this.

A person who holds an interest in a building (freehold or leasehold) can opt to tax the building, such that income from selling or letting the building is subject to VAT.

If you purchase a building and the purchase price includes VAT, you do not have to opt to tax that building.

Consider Ali who owns a VAT registered car repair business. He purchases a new commercial unit for £200,000 plus VAT of £40,000. The unit is used entirely for the car repair business, so Ali can reclaim the VAT of £40,000 in the same way he reclaims VAT on other purchases.

Ali does not have to opt to tax the unit to reclaim that VAT. In a few years Ali may want to sub-let the unit, in which case the rent will be exempt from VAT. This will make Ali’s business partially exempt, which may mean he cannot reclaim all the VAT charged on his purchases. In that situation Ali may choose to opt to tax the building so the rent must have VAT added.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Filed Under: 01 Tax Tagged With: Accountants in Balham, Accountants in Mitcham, Accountants in Putney, Accountants in Southfields, Accountants in Tooting, accountants in Wandsworth, accountants in Wimbledon, buildings, Opting, tax, vat

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Wimbledon Offices

164 Merton Road
Wimbledon, London
SW19 1EG

5 Smithwood Close
Wimbledon, London
SW19 6JL

Telephone: 020 8432 2969

Mitcham Office

The Generator Business Centre
95 Miles Road
Mitcham, Surrey
CR4 3FH (SatNav use CR4 3DA)

Telephone: 020 8432 2969

Some of the areas we serve

Battersea SW11, Colliers Wood SW19, Croydon CR0, Earlsfield SW18, Furzedown SW16, Mitcham CR4, Putney SW15, Southfields SW18 SW19, South London, Streatham SW16, Sutton SM1, SM2, Tooting SW17, Wandsworth SW18, Wimbledon SW19, Clapham SW4

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