Option to tax ― deciding whether to opt

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note discusses some of the key considerations that a person should take into account when deciding whether to opt to tax land and buildings.

For an overview of the option to tax more broadly, see the Option to tax ― overview guidance note.

For in-depth commentary, see De Voil Indirect Tax Service V4.110X.

Advantages of opting to tax land and buildings

Input tax recovery

The main advantage of opting to tax property is securing VAT recovery. Generally, VAT which is incurred on costs used to make exempt supplies of land and buildings is irrecoverable. By opting to tax, supplies of the property become standard-rated and VAT on costs used to make the supplies becomes recoverable, subject to the normal input tax recovery rules. For input tax recovery generally, see the Input tax ― overview guidance note.

To assess how worthwhile it is to opt to tax, a business needs to consider how much input tax is at stake (ie how much input tax can be recovered if the business opts

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