It has long been the position that the grant of an option to acquire land (a call option) is itself the grant of an interest in land, and therefore usually exempt from VAT unless the grantor has opted to tax the land. The same treatment applies to put options and surrenders of options.
What is option VAT tax?
The option to tax allows a business to choose to charge VAT on the sale or rental of commercial property i.e. to make a taxable supply out of what otherwise would be an exempt supply. Any option to tax does not affect a residential building or residential part of a building.
How do I get a copy of my option to tax?
For a copy, go to and enter ‘Notice 742A’ in the search box. For further information phone the VAT Helpline on 0300 200 3700. Use this form if you want to revoke an option to tax land or buildings within 6 months of the date the option took effect.
What is option to tax on property?
The option to tax allows a business to charge VAT on the sale or rental of commercial property, or in other words, to make a taxable supply from what otherwise would be a VAT exempt supply. The option to tax regulations were actually introduced in 1989 so each day more options to tax are eligible for revocation.
Do you pay VAT on residential rent?
The residential rental income is VAT exempt.
Can you opt to tax if not VAT registered?
1.2 The effect an option to tax has This means that no VAT is payable, but the person making the supply cannot normally recover any of the VAT incurred on their own expenses. But you can opt to tax land. You do not need to own the land in order to opt to tax.
Is there VAT on selling a house?
When you sell or rent an existing residential property such as a house or flat then you will normally be making a VAT exempt supply. This means you don’t charge VAT but cannot recover the VAT you incur on your purchases relating to it. This means you will not be able to recover the VAT you were charged on your costs.
How long does an option tax last?
20 years
The answer is because it is one of the few situations in the world of the nation’s favourite tax where a supplier has a choice of whether he charges VAT – and because that decision is binding for 20 years (if an option to tax election is made) it clearly has long-term consequences.
Does an option to tax transfer on sale?
Option to tax applies per property, but does not transfer with it. A new owner needs to opt to tax in order to get the tax benefits, rather than inherit the option to tax from the vendor.
How to opt to tax land or buildings for VAT?
Write to HMRC for help on opting to tax land or buildings for VAT purposes. Allow at least 40 working days for the Option to Tax Unit to reply to your enquiry.
How can I get help with option to tax?
While we have fewer advisers available due to coronavirus (COVID-19) and the measures put in place to stop the spread, please where possible only email HMRC with your forms and questions in regards to option to tax. Call HMRC for help on opting to tax land or buildings for VAT purposes.
Is the letting of a property exempt from VAT?
The letting of a property is exempt from Value-Added Tax (VAT). However, as a landlord you can opt to tax the letting of certain properties. But, if you own multiple properties you can limit the option to tax a letting to one property or specified properties.
Can a landowner charge VAT on his supplies?
If a landowner wants to charge VAT on his supplies, they must make an election with HMRC – hence the phrase “option to tax”. Here are two important principles with the option to tax rules in relation to land and buildings:
