VAT reclaim and HMRC

Overseas Buyers and VAT on UK Commercial Property

PropertyVAT Team · Updated 21 October 2026 · 3 min read

The VAT position on UK property follows the property, not the buyer. An overseas purchaser of an opted London office pays exactly the same 20% as a UK one.

What differs is the registration route — and the timetable, which is the part that causes problems.

The rules that do not change

• Commercial property is exempt by default
• An option to tax by the seller makes it standard-rated at 20%
• New commercial buildings are standard-rated regardless
• TOGC can take a sale outside the scope of VAT
• SDLT, LBTT or LTT is calculated on the VAT-inclusive consideration
• Recovery requires registration at the time of the purchase

None of this is affected by where the buyer is established.

Where registration differs

A business not established in the UK — a non-established taxable person — is in a different position from a UK business when it comes to registration.

UK businesses have a registration threshold below which registration is voluntary. For non-established businesses making taxable supplies in the UK, that threshold does not apply in the same way, which in practice often means registration is required rather than optional.

For a property purchase this frequently works in the buyer's favour: the question of whether to register voluntarily does not arise in the same terms, because the position is clearer.

The detail depends on the structure and what supplies the entity will make, so it is worth confirming with a UK VAT adviser rather than reasoning from the UK-resident rules.

The timetable is the real issue

This is the practical point.

HMRC registration for an overseas entity commonly takes longer than for a UK company. There is usually more to verify:

• Evidence of the entity's existence and standing in its home jurisdiction
• Identification for directors and beneficial owners, often from multiple countries
• Documentation that may need translation
• Clarity on the intended UK business activity

Each round of follow-up questions adds weeks. A UK SPV that might register in a few weeks can take considerably longer in an overseas structure.

Since recovery depends on registration being in place at the time of the purchase, this is the single item that should start first — well before it feels urgent.

UK structure or overseas entity?

Many overseas investors purchase through a UK company for reasons unrelated to VAT — lending, tax, familiarity for counterparties.

From a VAT perspective, a UK SPV is usually the more straightforward route: registration is quicker, HMRC's requirements are more routine, and UK solicitors and lenders are dealing with a familiar entity.

That is one factor among several, and the decision should be taken with UK tax and legal advice on the whole structure, not on VAT alone.

The option to tax

If you intend to let the property and charge VAT on rent — or if your purchase depends on TOGC treatment — you will need your own option to tax, notified to HMRC.

The rules are the same for overseas entities. The timing pressure is greater, because it sits behind a registration that is already taking longer.

Funding the VAT

An overseas buyer faces the same cash requirement: 20% at completion, recovered one to three months later.

Two things are often harder:

• Moving funds across borders to a timetable. Transfers, compliance checks and currency conversion all add friction to a fixed completion date.
• UK lender onboarding. Know-your-customer checks on an overseas structure take longer than on a UK SPV.

Both argue for starting the funding conversation early, for the same reason as the registration: the lead times are longer than the UK equivalents, and the completion date does not move to accommodate them.

Practical sequence

1. Decide the acquisition structure early, with UK tax advice.
2. Start VAT registration immediately — the longest lead time in the transaction.
3. Confirm the property's VAT position from the contract.
4. Notify an option to tax if required.
5. Begin lender onboarding early, given the KYC burden.
6. Plan the cross-border funds movement against the completion date, not the other way round.

This guide is general information, not tax advice. Registration requirements for non-established businesses are technical — take UK VAT advice on your structure.