Hi guys,
Does anybody know of any reason that a company would not have to opt to tax a new-build commercial property that is to be let at arms length to a trading subsidiary - yet still be able to recover 100% of the input tax.
The only 'trade' of the parent is rental of Land and Buildings - fully exempt unless OTT is elected.
The companies do not form a VAT group and are each individually VAT registered.
Any more info required please ask.
Many thanks
B-Man
Replies (8)
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The building hasn't been built yet. The lease is likely to run for about 15 years with break clauses at years 5 and 10.
Connected party rules
The connected party rules do not apply, as far as I can see. The tenant company has full VAT recovery, which is one of the key tests. But do monitor this, as any change in its activities can trigger the 'anti-avoidance' rules.
OTT not needed example
If a building is to be used mainly for warehousing or storage of goods then it's rental income is liable to VAT without the need for an option to tax.