Zero rating 20 yr old properties from August 2009
From 2 August 2009 it will be possible to revoke ‘options to tax’ made when the facility was first introduced 20 years ago on 1 August 1989. It was also known as ‘waiving the exemption from tax’.
When opting to tax a property, the landlord/owner was choosing to charge VAT on the rent and subsequent sale of the property. The advantage of doing this was to allow the landlord to recover VAT on expenditure connected with the building, such as purchase and ongoing maintenance costs. The imposition of VAT on the rent will not be a problem for any tenant that can fully recover the VAT charged on rent. This remains the case now and explains why the option to tax is commonly made.
However, for those organisations and businesses that cannot recover all the VAT they are charged, the imposition of VAT on the rent is a substantial additional cost for them. Landlords with such tenants may be eager to revoke an option to tax they made 20 years ago so as to reduce the rental cost burden on their tenants, as VAT will no longer be chargeable on the rent to the tenant.
In addition, landlords of empty properties will want to take the opportunity to make the building more attractive to prospective tenants including those that cannot recover their VAT in full e.g. financial institutions and charities.
Claims to revoke the option to tax after more than 20 years have passed should be made on form VAT 1614J.