As my client is looking to acquire the property and then rent it out, does he need to opt to tax the building? My client has no intention of occupying any part for his own use, and will not need to do any work to it in the immediate future.
A. As this is a new commercial building (defined as up to three years from the date of completion), if your client is buying the freehold then it is correct that the property would be standard rated with or without an option to tax being made by the vendor. This applies to all freehold sales within the three year period, not just the first. However, if a long lease were to be granted without an option to tax in place this would be exempt.
If your client rents out the property without opting to tax, then the supply will be exempt. The client will be unable to recover the VAT incurred on the purchase of the property or on any other costs relating to the purchase.
If your client opts to tax, then they will charge VAT on the rent, and will be entitled to recover the VAT on the purchase and associated costs.
If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
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