When should VAT be raised with a client?

At first contact, alongside the deposit and the funding structure. It costs ninety seconds to check and weeks to fix, so the cost of asking early is effectively zero.

What if the client does not know the VAT position?

That is itself the answer — it means nobody has checked. Treat it as an open risk until the contract or legal pack confirms the position in writing.

Which deals carry the highest VAT risk?

Recently refurbished or newly built commercial property, investment stock sold with tenants in place, and anything bought at auction. Opted property clusters at the better-quality end of the market.

Is a TOGC good news or a risk?

Both. If it works there is no VAT at all. But a TOGC that fails late leaves the client needing 20% within days, so it should always be treated as an outcome to plan around rather than assume.

For brokers

Spotting a VAT Problem Early

PropertyVAT Team · Updated 21 October 2026 · 2 min read

Almost every VAT emergency was visible weeks earlier. The problem is not that VAT is unpredictable — it is that nobody asks until the completion statement arrives.

The three questions

Ask these in the first conversation, before anything is packaged:

1. "Has the seller opted to tax?"

If the client does not know, that is an answer. It means nobody has checked, and the position is open.

2. "Is the buying entity VAT registered today?"

Not "we're setting that up". Not "the accountant's dealing with it". Today, with a number. This is the step that cannot be rescued after completion.

3. "Is this intended as a TOGC — and what happens if it fails?"

A TOGC removes the VAT entirely. A failed TOGC creates a 20% liability at short notice. The client should know which outcome they are planning for.

Ninety seconds. They reliably surface the issue while there is still time.

Warning signs in a case

Signal	Why it matters
Newly built or recently refurbished commercial property	More likely to be opted, or new enough to be standard-rated regardless
Investment stock sold with tenants	Opted property is common, and TOGC questions arise
Auction purchase	Fixed completion window, deposit at risk, no renegotiation
A brand new SPV	Registration may not be in place; first large claim invites HMRC checks
Client quoting the agent's particulars	The contract governs, not the marketing
Completion just after a VAT quarter end	Reclaim and facility both run months longer
"There's no VAT on commercial, is there?"	A confident assumption with nothing behind it

That last one is worth taking seriously. It is usually correct — most second-hand commercial property is exempt — which is exactly why it goes unchallenged on the deals where it is wrong.

Why early matters so much

The two steps that fix a VAT problem both run on HMRC's timetable:

VAT registration takes weeks, and HMRC may ask follow-up questions of a new SPV.
An option to tax must be notified, generally within 30 days of the decision, and acknowledgement is not instant. Options are not normally backdated.

Neither compresses to fit a completion date. A problem found at week two is administrative. The same problem found at week six is a missed completion.

What to do when you find one

Get the position evidenced, from the contract or legal pack, via the client's solicitor — in writing.
Check registration immediately. If it is not in place, this is the week to start it.
Size the real requirement. VAT at 20%, plus SDLT calculated on the VAT-inclusive figure.
Flag it to the senior lender, particularly if the VAT facility may need a second charge.
Agree VAT funding in principle, so the drawdown is the only step left.

The commercial case for asking

Raising VAT early is not just risk management. It is the cheapest way to look like the broker who has done this before.

Clients remember who stopped them losing a deposit. They do not often remember who found them a slightly better rate.

This guide is general information, not tax or financial advice. Clients should take their own VAT advice on their transaction.

Frequently asked questions

When should VAT be raised with a client?: At first contact, alongside the deposit and the funding structure. It costs ninety seconds to check and weeks to fix, so the cost of asking early is effectively zero.
What if the client does not know the VAT position?: That is itself the answer — it means nobody has checked. Treat it as an open risk until the contract or legal pack confirms the position in writing.
Which deals carry the highest VAT risk?: Recently refurbished or newly built commercial property, investment stock sold with tenants in place, and anything bought at auction. Opted property clusters at the better-quality end of the market.
Is a TOGC good news or a risk?: Both. If it works there is no VAT at all. But a TOGC that fails late leaves the client needing 20% within days, so it should always be treated as an outcome to plan around rather than assume.

Related guides

Need the VAT funded on a live deal?

Two-minute eligibility check. Approval in 48 hours, with no personal guarantees.

Check eligibility