Should a tenant opt to tax?
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.
Why would I opt to tax?
The three main reasons for opting to tax are: To facilitate VAT recovery on ongoing revenue expenditure relating to the property, for example, VAT on the cost of a maintaining and repairing a commercial property that is let out.
Should I opt to tax commercial property?
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.
What does an option to tax mean?
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.
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.
How do you 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 you back date 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 an individual opt to tax a property?
Individuals and businesses with land/buildings may benefit from opting to tax the property for VAT. Furthermore, there may be tax implications to consider when acquiring or selling land/buildings that are already opted to tax.
Is rent a taxable supply?
Note the words ‘taxable supplies’. Selling or renting a residential property, for example, is not a taxable supply and so the gains/income from either doesn’t need to be taken into account.
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.
Can a business recover VAT incurred before opting to tax?
VAT incurred prior to exercising the option to tax cannot be recovered, unless it related to costs incurred strictly in connection with the supply of the opted property (its sale or letting).
Does an option to tax run with the land?
Land that is opted to tax
HMRC considers that a valid option to tax will cover all of the land and any buildings and / or civil engineering works which are part of the land. The option to tax will be limited to the specific area of land specified in the notification submitted to HMRC.
When did option to tax start?
The option to tax rules were introduced on 1 August 1989, so with each day that passes, more elections will have passed the 20 year time period.
What does joint option to tax mean?
The joint option to tax is a shared decision and must be exercised by an agreement in writing between the parties to the transaction.
What is a transfer of going concern?
A transfer of a business as a going concern (TOGC) however is the sale of a business including assets which must be treated as a matter of law, as ‘neither a supply of goods nor a supply of services’ by virtue of meeting certain conditions.