Answers · UK 2025/26
What is the VAT option to tax on commercial property?
Opting to tax makes a commercial property's rental income and sale proceeds subject to 20% VAT, allowing the owner to recover input VAT on costs.
Full answer
By default, supplies of land and property are exempt from VAT. A landowner or property developer can exercise an "option to tax" (or "election to waive exemption") to make their supplies taxable at the standard rate (20%). This allows them to recover VAT on costs of construction, refurbishment, and professional fees. The option must be notified to HMRC within 30 days of the decision. Once made, the option lasts at least 20 years (unless HMRC grants permission to revoke). The option cannot be applied to dwellings, charitable buildings or buildings intended for conversion to dwellings. Sales of opted properties can be structured as a Transfer of a Going Concern (TOGC), which is outside the scope of VAT, if the buyer also opts to tax.
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.