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 Introduction 

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The supply of Land and Buildings (Freehold Sales, Leasing, or Rental) is normally Exempt from VAT and as such the person or company making the supply would not change VAT.  However at the same time if the supplier incurs costs in relation to the supply of Land and Buildings, they cannot usually recover the input VAT on such costs. 

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To enable VAT recovery on costs associated with the supply of Land and Buildings or interest in, there is the choice to Opt to Tax by submitting a notification to HMRC.  Once the Land is opted, all supplies in relation to the land and buildings will become taxable and at 20%.  

 

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Permission to Opt to Tax

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If you have made, or intend to make, any exempt supplies of the land or buildings within the 10 years prior to the date you wish your option to take effect, you will need our written permission to opt to tax.

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Normally if the Land or building has not been used to make exempt supplies, then the option to tax will normally be automatic and no need for HMRC notification.

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How to Opt to Tax

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To Opt to tax a business must:

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• First agree internally the decision to opt to tax and document this 

• Notify HMRC of the decision to Opt to Tax within 30 days of agreeing to opt to tax

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The decision to Opt to Tax should ideally be minuted during a board meeting as HMRC may request evidence for this.  The notification should include the land or building you wish to opt and specifically which areas of the land or building.  

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If you require greater detail about how to opt to tax, please see the attached HMRC link below.

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form VAT1614A VAT: notification of an option to tax land and buildings.

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-Contains public sector information licensed under the Open Government Licence v3.0.

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