VAT - Option to tax - Revision history

Designing Buildings at 06:13, 2 September 2021

2021-09-02T06:13:19Z

← Older revision		Revision as of 06:13, 2 September 2021
Line 38:		Line 38:
	There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.		There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.

−	~~= Find out more =~~	+	= Related articles =
−		+
−	=== Related articles ~~on Designing Buildings Wiki ==~~=	+

	* Budget.		* Budget.

Designing Buildings at 07:49, 7 November 2020

2020-11-07T07:49:37Z

← Older revision		Revision as of 07:49, 7 November 2020
Line 59:		Line 59:
	* [http://www.designingbuildings.co.uk/wiki/VAT_-_Protected_Buildings VAT - Protected Buildings].		* [http://www.designingbuildings.co.uk/wiki/VAT_-_Protected_Buildings VAT - Protected Buildings].

−	[[Category:Taxation]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Legislation]] [[Category:Taxation]]

Editor at 12:42, 9 July 2018

2018-07-09T12:42:08Z

← Older revision		Revision as of 12:42, 9 July 2018
Line 1:		Line 1:
−
	For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt, the question of how to recover any VAT incurred in relation to that building or land is an important issue.		For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt, the question of how to recover any VAT incurred in relation to that building or land is an important issue.

Line 5:		Line 4:

	Schedule 9 of the [http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act] provides that the following supplies of land (or buildings) are exempt from VAT:		Schedule 9 of the [http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act] provides that the following supplies of land (or buildings) are exempt from VAT:
−	*The grant of any interest in or right over land.	+
−	*The grant of any licence to occupy land.	+	* The grant of any interest in or right over land.
−	*In relation to land in Scotland, the grant of any personal right to call for or to be granted any such right or interest	+	* The grant of any licence to occupy land.
		+	* In relation to land in Scotland, the grant of any personal right to call for or to be granted any such right or interest

	The inability to recover input VAT on such exempt supplies represents a real cost burden for land owners or developers, and so HMRC permits a property owner to charge VAT at the standard rate (currently 20%) on supplies of property which would otherwise be exempt.		The inability to recover input VAT on such exempt supplies represents a real cost burden for land owners or developers, and so HMRC permits a property owner to charge VAT at the standard rate (currently 20%) on supplies of property which would otherwise be exempt.
Line 19:		Line 19:
	The option to tax has important consequences as it means that a property owner can recover all or part of its input tax. However, the property owner will also have to charge VAT at the standard rate on the supplies which it makes, for example, on the sales price if the property is being sold, or on the rent if the property is being leased. If a purchaser or tenant is registered for VAT and can recover VAT on the purchase price or rent the exercise by the property owner of the option to tax should not be problematic other than from a cash-flow perspective.		The option to tax has important consequences as it means that a property owner can recover all or part of its input tax. However, the property owner will also have to charge VAT at the standard rate on the supplies which it makes, for example, on the sales price if the property is being sold, or on the rent if the property is being leased. If a purchaser or tenant is registered for VAT and can recover VAT on the purchase price or rent the exercise by the property owner of the option to tax should not be problematic other than from a cash-flow perspective.

−	~~'''''~~However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.~~'''''~~	+	However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.

	There were amendments to the option to tax rules introduced in June 2008, and the VAT (Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.The changes are contained in Schedule 10 to the VAT Act and give a property owner the ability to do the following:		There were amendments to the option to tax rules introduced in June 2008, and the VAT (Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.The changes are contained in Schedule 10 to the VAT Act and give a property owner the ability to do the following:
−	*Make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax.	+
−	*Revoke an option to tax in the first six months after it is exercised without the need to obtain permission from HMRC (previously three months).	+	* Make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax.
−	*Revoke an option to tax after 20 years without the need to obtain permission from HMRC provided certain conditions are met. In addition, there is an automatic lapse of the option to tax.	+	* Revoke an option to tax in the first six months after it is exercised without the need to obtain permission from HMRC (previously three months).
−	*Where no interest in an opted property has been held for over six years (subject to certain anti-avoidance provisions), treat the option to tax as continuing to apply to the land after the opted buildings on the land have been demolished.	+	* Revoke an option to tax after 20 years without the need to obtain permission from HMRC provided certain conditions are met. In addition, there is an automatic lapse of the option to tax.
−	*Exclude new buildings on land which has been opted provided that notice of the exclusion is given to HMRC as necessary.	+	* Where no interest in an opted property has been held for over six years (subject to certain anti-avoidance provisions), treat the option to tax as continuing to apply to the land after the opted buildings on the land have been demolished.
		+	* Exclude new buildings on land which has been opted provided that notice of the exclusion is given to HMRC as necessary.

	The exercise of an option to tax involves the following:		The exercise of an option to tax involves the following:
−	*Firstly, an option must be exercised.	+
−	*Secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.	+	* Firstly, an option must be exercised.
		+	* Secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.

	Where a property owner makes a ‘real estate election’ (which must be in a prescribed form) the option to tax will apply automatically to all properties which are subsequently acquired without having to send notification of each election to HMRC and the option will be deemed to apply to the property with effect from the date the interest in the property is acquired.		Where a property owner makes a ‘real estate election’ (which must be in a prescribed form) the option to tax will apply automatically to all properties which are subsequently acquired without having to send notification of each election to HMRC and the option will be deemed to apply to the property with effect from the date the interest in the property is acquired.
Line 39:		Line 41:

	=== Related articles on Designing Buildings Wiki ===		=== Related articles on Designing Buildings Wiki ===
−	*Budget.	+
−	*Business rates.	+	* Budget.
−	*Cost plan.	+	* Business rates.
−	*PAYE.	+	* Cost plan.
−	*Stamp duty.	+	* PAYE.
−	*VAT.	+	* Stamp duty.
−	*VAT - Protected Buildings.	+	* VAT.
		+	* VAT - Protected Buildings.
		+	* VAT reverse charge.

	=== External references ===		=== External references ===
−	*[http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].	+
−	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].	+	* [http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].
−	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#2 Work on buildings other than ordinary homes that may be reduced-rated or zero-rated].	+	* HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].
−	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm Building and construction work and VAT].	+	* HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#2 Work on buildings other than ordinary homes that may be reduced-rated or zero-rated].
−	*[http://www.designingbuildings.co.uk/wiki/VAT_-_Protected_Buildings VAT - Protected Buildings].	+	* HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm Building and construction work and VAT].
		+	* [http://www.designingbuildings.co.uk/wiki/VAT_-_Protected_Buildings VAT - Protected Buildings].

	[[Category:Taxation]]		[[Category:Taxation]]

Designing Buildings at 14:51, 12 June 2013

2013-06-12T14:51:21Z

← Older revision		Revision as of 14:51, 12 June 2013
Line 36:		Line 36:
	There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.		There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.

−	= ~~See also~~ =	+	= Find out more =
		+
		+	=== Related articles on Designing Buildings Wiki ===
		+	*Budget.
		+	*Business rates.
		+	*Cost plan.
		+	*PAYE.
		+	*Stamp duty.
	*VAT.		*VAT.
		+	*VAT - Protected Buildings.
		+
		+	=== External references ===
	*[http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].		*[http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].
	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].		*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].

Designing Buildings at 08:18, 23 February 2013

2013-02-23T08:18:57Z

← Older revision		Revision as of 08:18, 23 February 2013
Line 1:		Line 1:

−	For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt the question of how to recover any VAT incurred in relation to that building or land ~~needs to be considered~~.	+	For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt, the question of how to recover any VAT incurred in relation to that building or land is an important issue.

	Where the supply of land and buildings is VAT exempt, as is usually the case, any VAT incurred on making that supply is irrecoverable and is thus a cost to be borne.		Where the supply of land and buildings is VAT exempt, as is usually the case, any VAT incurred on making that supply is irrecoverable and is thus a cost to be borne.

Designing Buildings at 08:12, 23 February 2013

2013-02-23T08:12:06Z

← Older revision		Revision as of 08:12, 23 February 2013
Line 1:		Line 1:
−	~~= '''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)''' =~~

	For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt the question of how to recover any VAT incurred in relation to that building or land needs to be considered.		For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt the question of how to recover any VAT incurred in relation to that building or land needs to be considered.
Line 6:		Line 5:

	Schedule 9 of the [http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act] provides that the following supplies of land (or buildings) are exempt from VAT:		Schedule 9 of the [http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act] provides that the following supplies of land (or buildings) are exempt from VAT:
−
	*The grant of any interest in or right over land.		*The grant of any interest in or right over land.
	*The grant of any licence to occupy land.		*The grant of any licence to occupy land.
Line 23:		Line 21:
	'''''However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.'''''		'''''However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.'''''

−	There were amendments to the option to tax rules introduced in June 2008, and the VAT (Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.The changes are contained in Schedule 10 to the VAT Act and give a property owner the ability to do the following:	+	There were amendments to the option to tax rules introduced in June 2008, and the VAT (Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.The changes are contained in Schedule 10 to the VAT Act and give a property owner the ability to do the following:
−		+
	*Make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax.		*Make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax.
	*Revoke an option to tax in the first six months after it is exercised without the need to obtain permission from HMRC (previously three months).		*Revoke an option to tax in the first six months after it is exercised without the need to obtain permission from HMRC (previously three months).
Line 32:		Line 29:

	The exercise of an option to tax involves the following:		The exercise of an option to tax involves the following:
−
	*Firstly, an option must be exercised.		*Firstly, an option must be exercised.
	*Secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.		*Secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.
Line 41:		Line 37:

	= See also =		= See also =
−
	*VAT.		*VAT.
	*[http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].		*[http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].

Designing Buildings at 07:23, 27 September 2012

2012-09-27T07:23:16Z

← Older revision		Revision as of 07:23, 27 September 2012
Line 1:		Line 1:
−	'''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)'''	+	= '''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)''' =

−	For anyone who has an interest in land or buildings and who makes supplies which are normally VAT exempt the question of how to recover any VAT incurred in relation to that building or land needs to be considered.	+	For anyone who has an interest in land or buildings and who makes supplies which are normally VAT (Value Added Tax) exempt the question of how to recover any VAT incurred in relation to that building or land needs to be considered.

−	Where the supply of land and buildings is VAT exempt, as is usually the case, any VAT incurred on making that supply is irrecoverable and is thus a cost to be borne.	+	Where the supply of land and buildings is VAT exempt, as is usually the case, any VAT incurred on making that supply is irrecoverable and is thus a cost to be borne.

−	~~Sch~~ 9 of the ~~VAT~~ Act provides that the following supplies of land (or buildings) are exempt from VAT:	+	Schedule 9 of the [http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act] provides that the following supplies of land (or buildings) are exempt from VAT:

−	~~• the~~ grant of any interest in or right over land; or	+	*The grant of any interest in or right over land.
		+	*The grant of any licence to occupy land.
		+	*In relation to land in Scotland, the grant of any personal right to call for or to be granted any such right or interest

−	~~• the grant of any licence~~ to ~~occupy~~ land; or	+	The inability to recover input VAT on such exempt supplies represents a real cost burden for land owners or developers, and so HMRC permits a property owner to charge VAT at the standard rate (currently 20%) on supplies of property which would otherwise be exempt.

−	~~• in relation to land in Scotland, the grant of any personal right to call for or to be granted any~~	+	This is known as the 'option to tax'
−		+
−	~~such right or interest~~	+
−		+
−	The inability to recover input VAT on such exempt supplies represents a real cost burden for land owners or developers so HMRC permits a property owner to charge VAT at the standard rate (currently 20%) on supplies of property which would otherwise be exempt.	+
−		+
−	This is known as the ~~“option~~ to ~~tax”~~	+

	Schedule 10 to the VAT Act deals with the option to tax on land and buildings.		Schedule 10 to the VAT Act deals with the option to tax on land and buildings.

−	In general the option to tax is limited to non-residential property. However, where the land or buildings are intended to be converted for dwelling, residential or charitable use, there are limits to when an option to tax can have effect	+	In general the option to tax is limited to non-residential property. However, where the land or buildings are intended to be converted for dwelling, residential or charitable use, there are limits to when an option to tax can have effect

−	The option to tax has important consequences as it means that a property owner can recover all or part of its input tax. However, the property owner will also have to charge VAT at the standard rate on the supplies which it makes, for example on the sales price if the property is being sold or on the rent if the property is being leased. If a purchaser or tenant is registered for VAT and can recover VAT on the purchase price or rent the exercise by the property owner of the option to tax should not be problematic other than from a cash-flow perspective.	+	The option to tax has important consequences as it means that a property owner can recover all or part of its input tax. However, the property owner will also have to charge VAT at the standard rate on the supplies which it makes, for example, on the sales price if the property is being sold, or on the rent if the property is being leased. If a purchaser or tenant is registered for VAT and can recover VAT on the purchase price or rent the exercise by the property owner of the option to tax should not be problematic other than from a cash-flow perspective.

	'''''However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.'''''		'''''However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.'''''

−	There were amendments to the option to tax rules introduced in June 2008 and the VAT	+	There were amendments to the option to tax rules introduced in June 2008, and the VAT (Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.The changes are contained in Schedule 10 to the VAT Act and give a property owner the ability to do the following:

−	~~(Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.~~	+	*Make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax.
−		+	*Revoke an option to tax in the first six months after it is exercised without the need to obtain permission from HMRC (previously three months).
−	~~The changes are contained in Schedule 10 to the VATA and give a property owner the ability to do the following:~~	+	*Revoke an option to tax after 20 years without the need to obtain permission from HMRC provided certain conditions are met. In addition, there is an automatic lapse of the option to tax.
−		+	*Where no interest in an opted property has been held for over six years (subject to certain anti-avoidance provisions), treat the option to tax as continuing to apply to the land after the opted buildings on the land have been demolished.
−	~~• make~~ a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax;	+	*Exclude new buildings on land which has been opted provided that notice of the exclusion is given to HMRC as necessary.
−		+
−	~~• revoke~~ an option to tax in the first six months after it is exercised without the need to obtain	+
−		+
−	permission from HMRC (previously three months);	+
−		+
−	~~• revoke~~ an option to tax after 20 years without the need to obtain permission from HMRC	+
−		+
−	provided certain conditions are met. In addition, there is an automatic lapse of the option to tax	+
−		+
−	~~where~~ no interest in an opted property has been held for over six years (subject to certain anti avoidance provisions);	+
−		+
−	• treat the option to tax as continuing to apply to the land after the opted buildings on the land	+
−		+
−	have been demolished~~; and~~	+
−		+
−	~~• exclude~~ new buildings on land which has been opted provided that notice of the exclusion is given to HMRC as necessary.	+

	The exercise of an option to tax involves the following:		The exercise of an option to tax involves the following:

−	Firstly, an option must be exercised ~~and secondly~~ the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.	+	*Firstly, an option must be exercised.
		+	*Secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.

	Where a property owner makes a ‘real estate election’ (which must be in a prescribed form) the option to tax will apply automatically to all properties which are subsequently acquired without having to send notification of each election to HMRC and the option will be deemed to apply to the property with effect from the date the interest in the property is acquired.		Where a property owner makes a ‘real estate election’ (which must be in a prescribed form) the option to tax will apply automatically to all properties which are subsequently acquired without having to send notification of each election to HMRC and the option will be deemed to apply to the property with effect from the date the interest in the property is acquired.

	There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.		There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.
		+
		+	= See also =
		+
		+	*VAT.
		+	*[http://www.legislation.gov.uk/ukpga/1994/23/contents Value Added Tax Act].
		+	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].
		+	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#2 Work on buildings other than ordinary homes that may be reduced-rated or zero-rated].
		+	*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm Building and construction work and VAT].
		+	*[http://www.designingbuildings.co.uk/wiki/VAT_-_Protected_Buildings VAT - Protected Buildings].

	[[Category:Taxation]]		[[Category:Taxation]]

Martincantor: Created page with "'''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)''' For anyone who has an interest in land or buildings and who makes supplies which are normally VAT exempt th..."

2012-09-26T18:49:54Z

Created page with "'''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)''' For anyone who has an interest in land or buildings and who makes supplies which are normally VAT exempt th..."

New page

'''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)'''

For anyone who has an interest in land or buildings and who makes supplies which are normally VAT exempt the question of how to recover any VAT incurred in relation to that building or land needs to be considered.

Where the supply of land and buildings is VAT exempt, as is usually the case, any VAT incurred on making that supply is irrecoverable and is thus a cost to be borne.

Sch 9 of the VAT Act provides that the following supplies of land (or buildings) are exempt from VAT:

• the grant of any interest in or right over land; or

• the grant of any licence to occupy land; or

• in relation to land in Scotland, the grant of any personal right to call for or to be granted any

such right or interest

The inability to recover input VAT on such exempt supplies represents a real cost burden for land owners or developers so HMRC permits a property owner to charge VAT at the standard rate (currently 20%) on supplies of property which would otherwise be exempt.

This is known as the “option to tax”

Schedule 10 to the VAT Act deals with the option to tax on land and buildings.

In general the option to tax is limited to non-residential property. However, where the land or buildings are intended to be converted for dwelling, residential or charitable use, there are limits to when an option to tax can have effect

The option to tax has important consequences as it means that a property owner can recover all or part of its input tax. However, the property owner will also have to charge VAT at the standard rate on the supplies which it makes, for example on the sales price if the property is being sold or on the rent if the property is being leased. If a purchaser or tenant is registered for VAT and can recover VAT on the purchase price or rent the exercise by the property owner of the option to tax should not be problematic other than from a cash-flow perspective.

'''''However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.'''''

There were amendments to the option to tax rules introduced in June 2008 and the VAT

(Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.

The changes are contained in Schedule 10 to the VATA and give a property owner the ability to do the following:

• make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax;

• revoke an option to tax in the first six months after it is exercised without the need to obtain

permission from HMRC (previously three months);

• revoke an option to tax after 20 years without the need to obtain permission from HMRC

provided certain conditions are met. In addition, there is an automatic lapse of the option to tax

where no interest in an opted property has been held for over six years (subject to certain anti avoidance provisions);

• treat the option to tax as continuing to apply to the land after the opted buildings on the land

have been demolished; and

• exclude new buildings on land which has been opted provided that notice of the exclusion is given to HMRC as necessary.

The exercise of an option to tax involves the following:

Firstly, an option must be exercised and secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.

Where a property owner makes a ‘real estate election’ (which must be in a prescribed form) the option to tax will apply automatically to all properties which are subsequently acquired without having to send notification of each election to HMRC and the option will be deemed to apply to the property with effect from the date the interest in the property is acquired.

There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.

[[Category:Taxation]]