Budget Notes

BN79 VAT: OPTION TO TAX LAND & BUILDINGS

Who is likely to be affected?

1. Anyone who makes supplies of land and / or buildings.

General description of the measure

2. This measure will simplify the legislation relating to the option to tax land and/or buildings. It will also introduce minor changes to enable taxpayers to revoke an option to tax after 20 years and make a number of associated changes to improve practical administration of the option to tax.

Operative date

3. The rewritten legislation will have effect on and after 1 June 2008. The earliest date an option to tax will be revocable will be 1 August 2009.

Current law and proposed revisions

4. The law relating to the option to tax land and buildings for VAT is contained in Schedule 10 to the VAT Act 1994.

5. A Treasury Order will be laid after Budget 2008 to insert a revised Schedule 10 into the VAT Act and make certain consequential changes to other VAT legislation, including new appeal rights. This will be accompanied by a public notice having the force of law.

6. A number of associated changes to improve practical administration of the option to tax and its revocation will be included in the legislation. These deal with:

•    opted properties held in a VAT group;

•    opted buildings acquired for use as dwellings or relevant residential purpose and bare land acquired for construction of building for such purposes;

•    the introduction of a new option to simplify the option to tax process for taxpayers with a number of properties;

•    early revocation of an option to tax within a "cooling-off" period;

•    the automatic lapse of an option to tax six years after the taxpayer ceased to have any interest in a property that they had previously opted to tax;

•    the ability, in certain circumstances, to exclude a new building from a previous option to tax; and

•    late applications for permission to opt to tax.

Further advice

7. If you have any questions about this change, please contact James Ormanczyk on 020 7147 0484 (email james.ormanczyk@hmrc.gsi.gov.uk). Further guidance and information will be published when the Treasury Order is laid. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk