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Opt to tax and change of use

Opt to tax and change of use

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Morning all,

A client has purchased a commercial property that had been opted to tax.  They have reclaimed the VAT and I will need to do a belated notification.  However, they are thinking of converting the building to residential properties. 

I know that if they had mentioned this prior to purchase they could have signed a VAT1614D certificate and not been charged VAT.  Can anyone confirm the position if they reclaim the VAT as a commercial property and then convert?  The flipside is that they could still use the property for commercial purposes (ie, a cafe) if they do not get planning consent! 

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By Les Howard
30th May 2014 09:51

VAT Option to Tax

You do not need to do a belated notification if you are converting to residential use.

Do ensure that the residences will be sold, not let, so as to make taxable, not exempt supplies.

If the sole use is a cafe, then input tax is still recoverable, since there is taxable use. And you still do not need to opt to tax!

(If the sums are significant, then you should seek more formal VAT advice on this one.)

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