Property types and scenarios

VAT on Portfolio Acquisitions

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Portfolio purchases get analysed at portfolio level — yield, covenant, WAULT. VAT does not work at portfolio level. It works property by property, and the aggregate position is whatever those individual answers add up to.

Each property has its own history

An option to tax applies to defined land or buildings, not to an owner's whole estate.

So in a ten-asset portfolio you might find:

That is five different VAT positions in one transaction. The seller may not have a consolidated record of them, particularly if assets were acquired at different times.

The due diligence requirement

Ask for, per property:

1. Whether an option to tax has been made, by the seller or any previous owner
2. The notification and HMRC's acknowledgement
3. The extent of the land each option covers
4. When any building was constructed, if recent
5. Whether the property is within a Capital Goods Scheme adjustment period
6. Current lettings and whether they continue to completion

Point three is the one most often skipped. An option over "the property at 14 High Street" may not cover a rear yard, a separate parcel, or an adjoining unit acquired later.

Point five matters at portfolio scale: inheriting several assets still within their ten-year adjustment periods brings ongoing obligations and potential clawbacks.

The partial exemption consequence

This is the strategic point, and it is easy to miss.

If the portfolio contains both opted and unopted properties, you will be making both taxable and exempt supplies. That makes you partly exempt, and recovery on costs relating to both is apportioned.

Those costs include the ones that matter: professional fees on the acquisition, head office overheads, and general advice.

A buyer who recovers in full on a single opted asset may recover considerably less on a portfolio with the same opted asset inside it.

The structuring question

Two routes, and the choice should be made before exchange.

One entity holding everything. Simpler and cheaper to run. Partial exemption applies across the whole portfolio, and recovery is apportioned.

Separate entities by VAT profile. Opted properties in one, exempt in another. Keeps recovery positions clean, but multiplies registrations, filings, accounts and lending arrangements.

There is no default answer. It depends on the mix, the scale of recoverable costs, and how much complexity the business can carry. It is also difficult to unwind afterwards, which is why it belongs in pre-exchange planning rather than post-completion tidying.

TOGC across a portfolio

A portfolio of let properties transferring as a continuing letting business can qualify as a TOGC, which removes VAT and the stamp duty on it across the whole transaction.

Complications at portfolio scale:

• Vacant assets may have no letting business to transfer
• Assets being sold on immediately may not meet the continuation test
• The buyer must opt over the properties where the seller has opted, and notify in time — potentially several options, each with its own deadline
• Mixed circumstances may mean the analysis differs across assets

Where TOGC applies to some assets and not others, the transaction may need to be approached in parts.

Practical sequence

1. Build a property-by-property VAT schedule at the start of due diligence.
2. Obtain option to tax evidence for each, with the extent of land covered.
3. Identify Capital Goods Scheme items and their remaining periods.
4. Model your partial exemption position on the resulting mix.
5. Decide the holding structure with advice, before exchange.
6. Establish which assets can support TOGC, and what you must do by when.
7. Register and opt as the structure requires — allow weeks.

The schedule in step one is the single most useful document in a portfolio VAT exercise, and the one most often produced too late to influence anything.

This guide is general information, not tax advice. Portfolio VAT, partial exemption and TOGC analysis are technical — take specialist advice before exchange.