The Value Added Tax (Buildings and Land) Order 2008 (SI 2008/1146) makes changes to the law on VAT on land and buildings – specifically in relation to the option to tax.. The new regulations substitute a brand new Schedule 10 into the Value Added Tax Act 1994, bringing in a rewritten set of rules relating to the option to tax. The new provisions came into force on 1st June 2008 and apply to supplies made on or after that date.
Co-inciding with the introduction of the new Schedule 10, HMRC has reissued, and republished on its website, VAT Notice 742A (Opting to tax land and buildings). This must be considered an essential read for property lawyers. One practical implication of the new rules is a change of terminology. Prior to 1 June 2008, the option to tax was also referred to as the election to waive exemption. From 1 June 2008, it is only referred to as the option to tax. Contracts and other transaction documents will be changed to reflect this change of terminology.
This month’s CPI Update – see CPI Update – June 2008 – explains in detail the changes that have been made to the option to tax.