VAT – Option to tax anti-avoidance rules
HMRC have published a new Revenue & Customs Brief which amends part of the option to tax anti-avoidance rules for supplies of land and buildings, which take effect from 1 March 2011.
The changes are designed to ensure that the option to tax is not disapplied in cases where a grantor occupies very minor parts of buildings. Currently the option to tax is disapplied where the grantor, or a person connected to the grantor, is in exempt occupation of the land (and the other conditions in the anti-avoidance rule are met).
The changes mean that an option to tax will no longer be disapplied where the grantor or persons connected with the grantor only occupy minor parts of buildings (no more than two per cent) even if the other conditions of the anti-avoidance rule are met.
The way that automatic teller machines (ATMs) are treated is also being amended. From 1 March 2011 occupation of any building which is solely by way of ATMs will not be treated as occupation for the purposes of the anti-avoidance test.