Vat on Land and Buildings

When purchasing commercial premises you need to know whether VAT will be added to the price as the stamp duty land tax charge (or similar taxes in Wales or Scotland) is calculated on the VAT inclusive value.

Most older commercial buildings will be exempt from VAT but not if the owner has opted to apply VAT and informed HMRC. The option to tax (OTT) applies for up to 20 years so it is important to confirm the correct VAT position.

HMRC will no longer confirm whether VAT should be added to the price if the OTT decision was made less than six years ago. Questions regarding an OTT decision recorded over six years ago will be actioned by HMRC but not with any urgency.

If the building owner has gone into receivership HMRC will respond to requests regarding OTT decisions from insolvency practitioners appointed to administer the property in question.

Where an OTT decision is made and submitted to HMRC by email it will be acknowledged automatically but no further confirmation will be sent. The building owner is responsible for recording and preserving the OTT decision should HMRC ever ask, or a potential purchaser need proof of the VAT status of the building.

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