What is option to tax on property
Can someone please explain to me. This question appear on VAT cancellation form
Really appreciate your help
Thank You
Replies (2)
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Brief explanation OTT
The guidance in notice 742A runs to some 73 pages, which can be somewhat intimidating / OTT to some.
So here is a one paragraph explanation:
Renting out commercial buildings (except for storage purposes) is VAT exempt as is selling them when more than x years old. A VAT registered person can choose to "Opt to Tax" or "waive the exemption" so that they can recover VAT relating to the building in question but in consequence have to charge VAT on rental income and when selling the building. It is NOT necessary (from a VAT mitigation viewpoint) to opt to tax a building where the building is occupied by the owner and used for fully VATable purposes (eg. used by a manufacturer or shop) or rented out for storage use, although if a building which has had VAT recovered on it is owned for less than 10 years then an option to tax might be advisable.
It is impossible to compress 73 pages into one paragraph, so the above paragraph is just a briefest of overview which I hope is helpful.