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Readers' forum: Option dilemma

15 August 2017
Issue: 4612 / Categories: Forum & Feedback

A company owns let properties. How can input tax on improvements be recovered?

I act on behalf of a corporate client which owns a range of commercial properties. Some of the properties have a VAT option to tax in place and others do not so the company is VAT-registered. One of the unopted properties had a tenant for many years but they vacated the premises last month. VAT was never charged on rent to this tenant. The company directors have now decided to spend about £100 000 plus VAT to refurbish the property after which they will look for a new tenant. The company has already spent £5 000 plus VAT on architects’ fees. To claim the input tax incurred on refurbishment costs and architects’ fees the company needs to make an option to tax election on the property and charge VAT on the rent to the future tenant. However I understand we need HMRC’s permission...

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