Exploring Options to Tax Land and Buildings

Understanding VAT Exemptions and Options

What is the Option to Tax Land?

Advantages of Opting to Tax Land

  1. Reclaim VAT on Expenses: The primary advantage of opting to tax land is the ability to reclaim VAT on allowable expenses. For instance, if you purchase a commercial property and decide to undertake renovations, you can reclaim the VAT incurred during the renovation process. This can significantly reduce your overall expenses.
  2. Financial Benefits: The ability to reclaim VAT can make a substantial financial difference, especially for businesses that invest heavily in maintaining or improving their properties.

Disadvantages of Opting to Tax Land

  1. Market Limitations: One of the main drawbacks is that selling a non-residential property with an option to tax can be more challenging. The market for such properties is smaller, as not all potential tenants will be willing or able to pay VAT on their rent.
  2. Long-Term Commitment: The option to tax land applies to a commercial property for a 20-year period. This long-term commitment can pose challenges. If your tenants leave during this period, finding replacements might be more difficult due to the VAT charges on rent.
  3. End of the Period: At the end of the 20-year period, the property reverts to being VAT-exempt on both expenses and income. This shift means that any VAT benefits gained during the period will no longer apply.


If you would like some assistance or advice on your Limited Company contact us today!

Here at PJCO we have a specialist property department, and if you need assistance starting your BTL journey, please feel free to book a free discovery call using the link below!

Please get in touch on 01273 441187 or book a discovery call with one of our expert accountants. 

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Charles Lyell

Never call an accountant a credit to his profession; a good accountant is a debit to his profession.

Charles Lyell