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Option to tax ― overview

Produced by a Tolley Value Added Tax expert
Value Added Tax
Guidance

Option to tax ― overview

Produced by a Tolley Value Added Tax expert
Value Added Tax
Guidance
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This guidance note provides an overview of the option to tax or election to waive exemption in relation to the supply of land and property.

For in-depth commentary on the option to tax, see De Voil Indirect Tax Service V4.110W.

What is the option to tax?

The option to tax is a choice (or election) by a business to waive the VAT exemption on the supply of certain land and buildings. Supplies of land and buildings which are covered by the option to tax are therefore standard-rated rather than exempt. There are potential advantages and disadvantages to this waiving of exemption and each case has to be considered on its merits. A key advantage is that the option to tax may entitle a business to recover additional input tax. If a decision is made to opt to tax land and buildings then that decision needs to be notified to HMRC and sometimes HMRC’s permission must also be sought

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