Opting out of VAT when buying land

Forum Categories VAT ON PROPERTY TRANSACTIONS Opting out of VAT when buying land

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    I am looking at buying a small strip of land, one small outbuilding is currently in situ but will probably be demolished and not replaced. 

    Currently the seller, who has large parcels of land across the UK, is telling me the land as part of their whole portfollio is liable for VAT. so will be sold as such and therefore increase the cost of my buying it by many tens of thousands of pounds so to be avoided if possible, the final use would be exempt VAT. 

    I believe this can be opted out of.

    A few questions if I may
    Would the seller have to have specified this particular area of land to the HMRC when opting in, and therefore have supporting itemised documentation/drawings etc? 
    If I buy the land and pay VAT could I at that point request to opt out ( post sale)?
    If I am able to opt out post sale could I claim back the VAT? 
    Is the opting out process long and drawn out, if so, what time scale? 

    If too difficult to answer here, any suggestions on finding a competent VAT specialist, is there a certain qualification I should look for when looking for a company to deal with it, I don’t want someone who ‘thinks’ they know, I need someone who knows ? 

    Many thanks


    Trevor S

    All of HMRC’s guidance on the option to tax is in their Notice 742A here: https://www.gov.uk/guidance/opting-to-tax-land-and-buildings-notice-742a. I’ll refer to extracts below.

    From your wording, it sounds like the seller has made either a Real Estate Election or a Global Option to Tax. Both are covered by section 14 and broadly have the effect of opting all or a large number of properties. It’s also possible that they may just routinely opt to tax all properties as they acquire them. All have conditions that need to be met. But on the basis that we have no reason to believe otherwise, I’ll assume that they do have a valid option to tax which covers the property in question

    Buyers cannot just choose to “opt out” of a seller’s option to tax. However, there are specific circumstances detailed in section 3 of the notice where the seller’s option to tax either won’t apply or can be “disapplied” by the buyer, and the sale will be VAT exempt. Generally they’re dependent on the current or intended use of the land and/or the status of the buyer, and some require the buyer to certify eligibility. But it would be worth you looking through that section to see if any seem relevant to your circumstances.

    Another consideration would be whether your purchase would be regarded as a Transfer of a Going Concern (TOGC). These are covered by a different Notice, 700/9: https://www.gov.uk/guidance/transfer-a-business-as-a-going-concern-and-vat-notice-7009, see section 6 of that notice onwards. Essentially this would most likely apply if:

    • the seller was currently letting the land to a third party tenant; and
    • you were buying the land with the ongoing lease to that third party and continued letting it to them; and
    • you registered for VAT (if you are not already) and opted to tax the land so that supplies you made of it were subject to VAT.

    If you meet the TOGC criteria, you would need to agree with the seller that it was a TOGC, and the sale would not be subject to VAT.

    If neither of the above apply, what is your intended use for the land? Would it be worth you registering for VAT and (if relevant) maybe opting to tax any onward supplies (if you’re making any)? You would need to consider whether your customers could disapply your option to tax.

    Hope this helps! Land and property generally (not just the option to tax) is a very complex area of VAT. So, particularly if it appears that the option to tax will still apply, you may well benefit from a consultation with a VAT advisor. They will then be in a position to offer advice with a more detailed understanding of your business and your intended use of the property.


    Thank you for your very detailed answer, we have read and reread all you mention, the more we read the less we understand, hence also asking about how to find a suitable specialist advisor. 

    The land as it is has a small derelict building that we will remove. Going forwards nothing will be built in its place, apart from fencing erected around the perimeter.
    The ongoing purpose would in normal circumstances be VAT exempt.
    I do have a registered company that could claim the VAT back, that could buy it and probably the way we will go if VAT is unavoidable.it would just have been preferable to own it personally but to finance it that way would mean personally taking money out of the company at 40%tax which seems counterintuitive to save 20% VAT
    Sorry to be vague about the specifics of the land but for several reasons I’m not keen to share too many details. 
    Thanks for speedy and comprehensive reply. 

    Trevor S

    Thanks. I think that a consultation with a VAT advisor is going to be the best option for you. I fully understand your reluctance to go into detail on a public forum, but it’s a bit like seeking a medical diagnosis without fully describing the symptoms! The missing information may well impact on the VAT position. It may mean that potential opportunities aren’t suggested and/or irrelevant ones are (which then only adds to the confusion). Hopefully in a private consultation you’ll feel more able to provide the information.

    Do you already have an accountant – if so, they may already be aware of an advisor who has assisted other clients with land and property VAT issues. Professional bodies are the CIOT (Chartered Institute of Taxation) and the ATT (Association of Taxation Technicians). The CIOT’s CTA qualification is a higher level than the ATT, some CTAs will have taken the ATT first. There was once a separate body for indirect taxes such as VAT called the IIT (Institute of Indirect Taxation), however this merged with the CIOT some years ago. There are some big differences in principles between direct and indirect taxation, and at one stage they fell under different tax authorities – Inland Revenue and HM Customs and Excise. So an expert in one area may have a more limited understanding of the other. Over time, the CIOT/IIT merger may help to address this.

    Bear in mind that there are also many highly experienced and knowledgeable advisors who do not hold a professional qualification. Ex-HMRC employees are likely to be in this position, as HMRC/HMCE run their own training and professional development programmes. Some who were employed in in-house advisory roles will be in a similar position. Potentially there are advantages of experience when dealing with specific very technical advisory issues which won’t necessarily have been covered in an exam. However, the lack of membership does mean that their work won’t be governed by the rules of a professional body.


    Thank you again. 
    I did realise being deliberately vague might be a problem and yes, of course would disclose everything to a consultant..
    I do have an accountant and trust thier advice as far as it goes but it’s one of those things, you don’t know what you don’t know till you know it, and with this particular transaction its a little bit out of most people’s experience and knowledge. 
    Thank you for info on expert I will certainly look for someone and happily pay for the right advice. Thanks again for taking the time to reply so fully

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