Briefings
VAT Tax Alert
Real Estate
Real Estate Taxation
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| May 2008 |
From 1 June 2008, a rewritten Schedule 10 of the Value Added Tax Act 1984 will come into force. The opportunity has been taken to clarify the rules governing the option to tax
commercial property, but there are a few substantive changes that property investors need to know about:
- A "real estate election" can be made for the
first time. The effect of making such an
election is to opt to tax all commercial
property subsequently acquired by the maker
of the election and anybody in the same VAT
group. There is no effect on properties already
owned at the time of the election.
- An option to tax can be revoked within six
months of the exercise of the option as long as
certain conditions are satisfied, such as nonusage
of the land, no chargeable tax having
become payable, and no TOGC having taken
place.
- An option to tax can be revoked after 20 years
of the date of the exercise of the option
without HMRC consent if certain conditions
are satisfied. The first elections would have
been made on 1 August 1989 and so the ability
to revoke them will arise for the first time next
year.
- Subject to certain transitional rules, it will no
longer be possible to opt to tax land and the
buildings on it separately. It will however be
possible to exclude a newly constructed
building from the option to tax.
- A buyer who intends to convert a building for
residential use etc will now have to provide a
certificate before a legally binding price is
agreed if he wishes to disapply the seller's
option to tax. Such disapplication of t he
option will now be possible through a chain of
intermediaries. Both of these issues have
caused problems for our clients in recent
months and the changes are welcomed.
IMPORTANT: This Update is only intended as a general statement and no action should be taken in reliance on it without specific legal advice
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IMPORTANT: This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice. Release Date: 29 May 2008
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