When you are acquiring a commercial building, you need to know whether the purchase price will include VAT. Older non-residential buildings will normally be exempt from VAT, but not if the owner has opted to apply VAT (“opted to tax”) at some point.
Once this option to tax (OTT) is in place it lasts for at least 20 years, so it is important to confirm the correct VAT position. Unfortunately, HMRC has said it 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 probably not with any urgency.
Going forwards, the building owner is responsible for recording and preserving the OTT decision should HMRC ever ask, or a potential purchaser needs proof of the VAT status of the building.
Where you have bought the premises to let out, you may want to charge VAT on the rents, so that you can set off any VAT you pay on costs relating to the building. In this case you need to make an OTT application yourself and inform HMRC.
We can help you with this.
