An interesting suggestion appears in Property Week as to how VAT on rents can affect negotiations in relation to leases – see VAT provides weapon for landlord’s negotiations.
Landlords may be able to revoke an option to tax, so that rent is payable without VAT. This, of course, is only of interest to those tenants whose VAT-exempt status means that they are unable to recover VAT charged by their landlords. However, since 1st August 2009, very old options became capable of revocation. VAT on land and buildings was first introduced on August 1st 1989. Under paragraph 25, schedule 10, VATA 1994, an option to tax may be revoked if a period of more than 20 years has elapsed since the day on which the option had effect. To revoke the option, the taxpayer must comply with the conditions specified in VAT Notice 742A – Opting to tax land and buildings – issued by HMRC, and must obtain the prior permission of HMRC.