VAT on commercial property

How to Opt to Tax a Property

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Opting to tax is simple to describe and easy to get wrong on timing. The rules reward people who start early and penalise people who treat it as a completion-week formality.

The two steps

Step one: make the decision. The owner, or intending owner, decides to opt to tax a specific property or defined area of land.

Step two: notify HMRC. Generally within 30 days of the decision, usually on form VAT1614A.

People conflate these. The distinction matters because the 30-day clock runs from the decision, and because a decision never notified gives you nothing.

What you need before you notify

• The entity making the option, and its VAT registration details
• A clear identification of the property or land — address, and a plan where the boundary is not obvious
• The date from which the option takes effect
• Signature from someone authorised to make it

Be precise about the land. An option applies to the property or area you identify, so a vague description can leave you with an option over something other than what you meant.

The timing traps

It is not normally backdated

An option generally takes effect from the date you specify going forward. You cannot usually fix the position retrospectively once completion has passed. This is why late options cause irrecoverable VAT rather than mild inconvenience.

Acknowledgement takes time

HMRC acknowledges notifications, but not instantly. If anything in your transaction depends on the option being demonstrably in place — a TOGC almost always does — you need the notification in well before completion, and ideally the acknowledgement too.

The seller's option does not transfer

This one costs deals. If the seller has opted, that obliges them to charge you VAT. It does not make you an opted owner. If you need to charge VAT on rent, or you need a TOGC, you must opt yourself.

There is a cooling-off period, then 20 years

An option can generally be revoked within a short window after it takes effect, subject to conditions. After that it is effectively locked in for 20 years. Treat it as a long-term decision, not a transactional convenience.

When you should opt

That last row matters. Charging VAT on rent is neutral for a VAT-registered tenant and a real cost for an exempt one — a charity, a financial services business, some healthcare operators. Opting can narrow your tenant market.

The sequence that works

1. Week the deal is agreed: incorporate the SPV if needed; start VAT registration.
2. Immediately after: take advice on whether to opt, and on TOGC treatment.
3. As soon as the decision is made: notify HMRC. Do not wait for registration to be issued if advice is that you should opt now.
4. Before exchange: have the notification, and ideally the acknowledgement, on file.
5. At completion: your solicitor can evidence the position.

If you have missed the deadline

Take advice quickly rather than filing something and hoping. HMRC has processes for belated notification in some circumstances, but they are discretionary and not a reliable plan. The cost of getting this wrong is usually the entire VAT on the purchase.

This guide is general information, not tax advice. Option to tax rules are detailed and the consequences are long-lasting — take specialist VAT advice before notifying.