Since the 1980s, an EU ruling has overridden UK VAT rules. This means that you must charge VAT when you make property supplies (e.g charge rent) if you choose to opt to tax a property.
But why would you opt to tax a property?
Unless your property is new (less than 3 years since construction), any supplies (letting/selling) are VAT exempt. If opting just meant there was an obligation to add VAT to rent etc it would be pointless.
However, opting also allows you to reclaim VAT paid on maintenance repairs and improvement costs. Therefore, you only need to consider opting to tax property if you intend to make supplies of it (letting etc).
How would you opt?
Usually, you don’t need permission from HMRC to opt to tax a property but, like most things, there are exceptions. You need permission to opt if there has been an exempt supply of the property to prevent an unfair VAT advantage.
In all other cases all you need to do is record when the option was made in your records and notify HMRC- we can do that for you today!
If you need help figuring out if you are exempt or if you need permission from HMRC, get in contact with us on 01622 738165.