In most cases the sale of land to a housebuilder is exempt from VAT unless the vendor has opted to tax it. The main effect of opting to tax is that the landowner charges VAT on the sale and recovers VAT on the costs, providing there is an appropriate VAT registration in place.
Do you pay VAT on property purchase?
As a general rule, the sale or lease of a commercial property is exempt from VAT, which means neither a purchaser nor a tenant would have to pay VAT. The latter may occur where a property has been refurbished or renovated, and the vendor or landlord is looking to recover the VAT costs associated with that work.
Can you reclaim VAT on a piece of land?
Opting a building or a piece of land means that VAT charges incurred in development of the land or property can be reclaimed. For example, the £20,000 VAT spent on renovating a property cannot normally be reclaimed unless the developer took the “option to tax”.
Is there a vat clawback on a land sale?
If the CGS applies, it applies for 10 years, and an exempt supply of the land after 4 years would result in a clawback of 60% of the input tax recovered on the purchase price and associated costs. If below the CGS threshold, then the change of use rule in VAT Reg 108 could catch your client in a similar way.
Can a business charge VAT on a plot of land?
Taking this option allows a business to reclaim any VAT costs that would not normally be reclaimed but any supplies that derive from the building must charge VAT. The option to tax can cover a plot of land or a building.
Do you have to pay VAT on a property purchase?
No VAT is charged on such transactions, providing all the criteria for TOGC treatment are present. If the seller has opted to tax in respect of the property or the property in question is standard rated then the purchaser must also opt to tax and notify HMRC in writing of that option to tax prior to the date of supply.
