VAT on commercial property

What If the Seller Is Not VAT Registered?

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Most VAT guidance assumes the seller is registered and has opted to tax. A surprising number of commercial transactions involve sellers who are not registered at all — private individuals, small family companies, pension schemes, charities, and estates.

What it means immediately

Only a VAT-registered person can charge VAT and issue a valid VAT invoice.

So if the seller is not registered:

• No VAT is charged on the purchase
• No VAT funding is required
• No reclaim arises, because there is nothing to reclaim
• SDLT is calculated on the price alone, with no VAT in the consideration

For a buyer, that is generally the cleanest possible outcome. It removes the funding requirement, the reclaim cycle and the extra stamp duty in one go.

The question worth asking anyway

Why are they not registered?

Most of the time the answer is benign: a private landlord below the registration threshold with a single unopted property, a pension scheme that never needed to register, a company whose only activity is exempt letting.

But two situations deserve a second look.

The building is new. The sale of a new commercial building is standard-rated regardless of any option to tax. A seller making a large standard-rated supply may have a registration liability — and a seller who has not registered may be about to discover that.

The sale is substantial and the seller has opted. An option to tax only produces VAT if the person is registered. A seller who opted but never registered has an inconsistency that should be resolved before you complete, not after.

In both cases, the risk to you is that VAT appears late, or that the position is corrected after completion and someone seeks to pass it on.

Protecting yourself

Through your solicitor, in writing, before exchange:

1. Confirm the seller is not VAT registered. A statement, not an assumption.
2. Confirm no option to tax has been made by the seller or any previous owner.
3. Confirm when construction of the building was completed, if it could be recent.
4. Address in the contract what happens if VAT is subsequently found to be chargeable — who bears it.

That fourth point is the practical protection. A contract that is silent leaves the question open; one that allocates the risk means you know your position whatever emerges.

The "VAT" that is not VAT

Occasionally an unregistered seller will add 20% to the price, or describe part of the price as VAT.

That is not VAT. It is simply more money. You cannot reclaim it, because no registered supplier charged it and no valid VAT invoice can exist.

If a seller's figures include something labelled VAT, establish their registration number before you treat any part of the price as recoverable. This is more common on smaller transactions and private sales than most buyers expect.

Your own position is unaffected

Two things remain true regardless of the seller's status:

Your professional fees still carry VAT. Solicitors, agents and surveyors are supplying services, and those are standard-rated whatever the VAT status of the property or the seller. Recovery on those follows your own position as normal.

Your own registration still matters. If you intend to opt to tax and let the property on a taxable basis, you will need your own registration and option — the seller's status has no bearing on that.

The summary

An unregistered seller usually means a simpler, cheaper transaction. Confirm it in writing, check the building is not new, deal with the "what if" in the contract, and then enjoy the fact that there is no 20% to find on completion day.

This guide is general information, not tax advice. Registration liabilities are fact-specific — take advice where the position is unclear.