Value Added Tax Act 1994

[F1 Scope of the option, its duration, notification etc U.K.

Textual Amendments

F1 Sch. 10 substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2008 (S.I. 2008/1146), arts. 1(1), 2 (with Sch. 2)

Scope of the option U.K.

18. (1) An option to tax has effect in relation to the particular land specified in the option.

(2) If an option to tax is exercised in relation to—

(a) a building, or

(b) part of a building,

the option has effect in relation to the whole of the building and all the land within its curtilage.

(3) If an option to tax—

(a) is exercised in relation to any land, but

(b) is not exercised by reference to a building or part of a building,

the option is nonetheless taken to have effect in relation to any building which is (or is to be) constructed on the land (as well as in relation to land on which no building is constructed).

(4) For the purposes of this paragraph—

(a) buildings linked internally or by a covered walkway, and

(b) complexes consisting of a number of units grouped around a fully enclosed concourse,

are treated as a single building.

(5) But for those purposes—

(a) buildings which are linked internally are not treated as a single building if the internal link is created after the buildings are completed, and

(b) buildings which are linked by a covered walkway are not treated as a single building if the walkway starts to be constructed after the buildings are completed.

(6) In this paragraph a “building” includes—

(a) an enlarged or extended building,

(b) an annexe to a building, and

(c) a planned building.

(7) In this paragraph “covered walkway” does not include a covered walkway to which the general public has reasonable access.

The day from which the option has effect U.K.

19. (1) An option to tax has effect from—

(a) the start of the day on which it is exercised, or

(b) the start of any later day specified in the option.

(2) But if, when an option to tax is exercised, the person exercising the option intends to revoke it in accordance with paragraph 23 (revocation of option: the “cooling off” period), the option is treated for the purposes of this Act as if it had never been exercised.

(3) An option to tax may be revoked in accordance with paragraph 22(2) or (3) and any of paragraphs 23 to 25, but not otherwise.

(4) This paragraph needs to be read with—

(a) paragraph 20 (requirement to notify the option), and

(b) paragraph 29(3) (application for prior permission in the case of an exempt grant before the exercise of an option to tax).

Requirement to notify the option U.K.

20. (1) An option to tax has effect only if—

(a) notification of the option is given to the Commissioners within the allowed time, and

(b) that notification is given together with such information as the Commissioners may require.

(2) Notification of an option is given within the allowed time if (and only if) it is given—

(a) before the end of the period of 30 days beginning with the day on which the option was exercised, or

(b) before the end of such longer period beginning with that day as the Commissioners may in any particular case allow.

(3) The Commissioners may publish a notice for the purposes of this paragraph specifying—

(a) the form in which a notification under this paragraph must be made, and

(b) the information which a notification under this paragraph must contain.

(4) Notification of an option to tax does not need to be given under this paragraph if the option is treated as exercised in accordance with paragraph 29(3).

Real estate elections: elections to opt to tax land subsequently acquired U.K.

21. (1) A person (E) may make an election (a “real estate election”) for this paragraph to have effect in relation to—

(a) relevant interests in any building or land which E acquires after the election is made, and

(b) relevant interests in any building or land which a [F2 person] acquires after the election is made at a time when [F3 the person] is a relevant group member.

(2) If E makes a real estate election—

(a) E is treated for the purposes of this Part of this Schedule as if E had exercised an option to tax in relation to the building or land in which the relevant interest is acquired,

(b) that option is treated for those purposes as if it had been exercised on the day on which the acquisition was made and as if it had effect from the start of that day, and

(c) paragraph 20 does not apply in relation to that option,

but this sub-paragraph is subject to sub-paragraphs (3) to (5).

(3) A person (P) is not to be treated as a result of this paragraph as exercising an option to tax in relation to any building or land where at any time—

(a) P, or any [F4 person who] was a relevant group member at that time, exercises an option to tax in relation to the building (or part of the building) or land apart from this paragraph, and

(b) that option has effect from a time earlier than the time from which an option to tax exercised by P in relation to the building or land would otherwise have been treated as having effect as a result of this paragraph.

(4) A person (P) is not to be treated as a result of this paragraph as exercising an option to tax in relation to any building or land in which a relevant interest is acquired (“the later interest”) if—

(a) the person making the acquisition in question held another relevant interest in that building or land before P makes a real estate election, and

(b) the person making the acquisition in question continues to hold that other relevant interest at the time when the later interest is acquired.

(5) A person is not to be treated as a result of this paragraph as exercising an option to tax in relation to any building or land if—

(a) a relevant interest in the building or land is acquired as mentioned in sub-paragraph (1), and

(b) on the relevant assumptions the case would fall within paragraph 28 (pre-option exempt grants: requirement for prior permission before exercise of option to tax).

(6) The relevant assumptions are that—

(a) the effect of this paragraph is disregarded, and

(b) the day from which the person would want the option to tax to have effect for the purposes of paragraphs 28 or 29(3) is the day on which the relevant interest is acquired.

(7) A real estate election has effect only if—

(a) notification of the election is given to the Commissioners before the end of the period of 30 days beginning with the day on which it was made or such longer period as the Commissioners may in any particular case allow,

(b) the notification is made in a form specified in a public notice, and

(c) the notification contains information so specified.

(8) The Commissioners may at any time require a person who has made a real estate election to give to the Commissioners information specified in a public notice before the end of—

(a) the period of 30 days beginning with that time, or

(b) such longer period as the Commissioners may in any particular case allow.

(9) If a person (P) does not comply with that requirement—

(a) the Commissioners may revoke the election, and

(b) that revocation has effect in relation to relevant interests in any building or land acquired after the notified time by P or a [F5 person who] is a relevant group member at the time of acquisition.

• “The notified time” means the time specified in a notification given by the Commissioners to P (which may not be before the notification is given).

(10) A real estate election may not be revoked except in accordance with sub-paragraph (9).

(11) If a real estate election made by a person (P) is revoked in accordance with that sub-paragraph, another real estate election may be made at any subsequent time by—

(a) P, or

(b) any [F6 person who] is a relevant group member at that subsequent time,

but only with the prior permission of the Commissioners.

(12) In this paragraph—

• “relevant group member”, in relation to any person [F7 (“P”)] making a real estate election and any time, means a [F8 person who] is treated under sections 43A to 43D as a member of the same group as [F9 P] at that time, and

• “relevant interest”, in relation to any building or land, means any interest in, right over or licence to occupy the building or land (or any part of it).

[F10 (13) For the purposes of this paragraph, the time at which a relevant interest in any building or land is acquired is—

(a) the time at which a supply is treated as taking place for the purposes of the charge to VAT in respect of the acquisition, or

(b) if there is more than one such time, the earliest of them.

(14) For the purposes of sub-paragraph (13)(a), any order under section 5(3)(c) that would otherwise have the effect that the acquisition in question is to be treated as neither a supply of goods nor a supply of services is to be disregarded.]

Textual Amendments

F2 Word in Sch. 10 para. 21(1)(b) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(a)(i); S.I. 2019/1348, reg. 2

F3 Words in Sch. 10 para. 21(1)(b) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(a)(ii); S.I. 2019/1348, reg. 2

F4 Words in Sch. 10 para. 21(3)(a) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(b); S.I. 2019/1348, reg. 2

F5 Words in Sch. 10 para. 21(9)(b) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(c); S.I. 2019/1348, reg. 2

F6 Words in Sch. 10 para. 21(11)(b) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(d); S.I. 2019/1348, reg. 2

F7 Word in Sch. 10 para. 21(12) inserted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(e)(i); S.I. 2019/1348, reg. 2

F8 Words in Sch. 10 para. 21(12) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(e)(ii); S.I. 2019/1348, reg. 2

F9 Word in Sch. 10 para. 21(12) substituted (1.11.2019) by Finance Act 2019 (c. 1), s. 53(2), Sch. 18 para. 15(4)(e)(iii); S.I. 2019/1348, reg. 2

F10 Sch. 10 para. 21(13)(14) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 4

Real estate elections: supplementary U.K.

22. (1) This paragraph applies if, at any time (“the relevant time”), a person (E) makes a real estate election under paragraph 21.

(2) An option to tax exercised in relation to any building or part of any building before the relevant time by—

(a) E, or

(b) any relevant group member,

is treated for the purposes of this Part of this Schedule as if it had been revoked from the relevant time if, at that time, neither E nor any relevant group member has a relevant interest in that building.

(3) An option to tax exercised in relation to any land (otherwise than by reference to any building or part of a building) before the relevant time by—

(a) E, or

(b) any relevant group member,

is treated for the purposes of this Part of this Schedule as if it had been revoked in accordance with sub-paragraph (4) from the relevant time if, at that time, neither E nor any relevant group member has a relevant interest in that land, or E or any relevant group member has a relevant interest in only some of it.

(4) The option is treated for the purposes of this Part of this Schedule as if it had been revoked in relation to—

(a) that land, or

(b) the parts of that land in which neither E nor any relevant group member has a relevant interest at the relevant time,

as the case may be.

(5) Sub-paragraphs (2) and (3) are subject to paragraph 26 (anti-avoidance).

(6) An option to tax (“the original option”) exercised in relation to any land (otherwise than by reference to any building or part of a building) before the relevant time by—

(a) E, or

(b) any relevant group member,

may, in circumstances specified in a public notice, be converted by E into separate options to tax if, at the relevant time, E or any relevant group member has a relevant interest in the land or any part of it.

(7) The original option is converted into separate options to tax different parcels of land comprised in that land or part.

(8) Those separate options to tax are treated for the purposes of this Part of this Schedule—

(a) as if they had been exercised by E, and

(b) as if they had effect from the time from which the original option had effect.

(9) But—

(a) those separate options to tax are treated for the purposes of paragraph 3(2) as if they had effect from the relevant time, and

(b) paragraph 23 (revocation of an option: the “cooling off” period) does not apply to those separate options to tax.

(10) The notification of the election given by E must identify—

(a) the separate options to tax treated as exercised by E as a result of sub-paragraphs (6) to (8), and

(b) the different parcels of land in relation to which those separate options to tax are treated as having effect.

(11) In this paragraph—

(a) any reference to any relevant group member is to a body corporate which is a relevant group member at the relevant time, and

(b) any reference to any relevant group member, in relation to any relevant interest in any building or land (or any part of it), is to any relevant group member regardless of whether it has exercised an option to tax the building or land (or any part of it).

(12) In this paragraph “relevant group member” and “relevant interest”, have the meaning given by paragraph 21.

(13) In this paragraph any reference to a real estate election under paragraph 21 does not include an election which is made under sub-paragraph (11) of that paragraph.

Revocation of option: the “cooling off” period U.K.

23. (1) An option to tax any land exercised by any person (“the taxpayer”) may be revoked with effect from the day on which it was exercised if—

(a) the time that has lapsed since the day on which the option had effect is less than 6 months,

F11 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) no tax has become chargeable as a result of the option,

(d) there is no relevant transfer of a business as a going concern (see sub-paragraph (2)), and

(e) notification of the revocation is given to the Commissioners (see sub-paragraph (3)).

(2) There is no relevant transfer of a business as a going concern if, since the option had effect, no grant in relation to the land has been made which is treated as neither a supply of goods nor a supply of services because—

(a) the supply is a supply of the assets of a business by the taxpayer to a person to whom the business (or part of it) is transferred as a going concern, or

(b) the supply is a supply of assets of a business by a person to the taxpayer to whom the business (or part of it) is so transferred.

(3) The notification of the revocation must—

(a) be made in a form specified in a public notice, and

(b) contain information so specified.

(4) The Commissioners may publish a notice for the purposes of this paragraph providing that a revocation under this paragraph is effective only if—

(a) the conditions specified in the notice are met in relation to the option, or

(b) the taxpayer gets the prior permission of the Commissioners on an application made to them before the end of the 6 month period mentioned above.

(5) A notice under sub-paragraph (4) may—

(a) provide that, in a case falling with paragraph (a) of that sub-paragraph, the taxpayer must certify that the conditions specified under that paragraph are met in relation to the option,

(b) specify the form in which an application under paragraph (b) of that sub-paragraph must be made,

(c) provide that an application under that paragraph must contain a statement by the taxpayer certifying which (if any) of the conditions specified under sub-paragraph (4)(a) are met in relation to the option,

(d) specify other information which an application under sub-paragraph (4)(a) must contain, and

(e) provide that the Commissioners may specify conditions subject to which their permission is given and, if any of those conditions are broken, the Commissioners may treat the revocation as if it had not been made.

Textual Amendments

F11 Sch. 10 para. 23(1)(b) omitted (1.4.2010) by virtue of The Value Added Tax (Buildings and Land) Order 2010 (S.I. 2010/485), arts. 1, 7

Revocation of option: lapse of 6 years since having a relevant interest U.K.

24. (1) An option to tax exercised by any person in relation to any building or land is treated for the purposes of this Part of this Schedule as revoked if the person does not have a relevant interest in the building or land throughout any continuous period of 6 years beginning at any time after the option has effect.

(2) The option to tax is treated for the purposes of this Part of this Schedule as revoked from the end of that period.

(3) In this paragraph “a relevant interest in the building or land” means an interest in, right over or licence to occupy the building or land (or any part of it).

(4) This paragraph is subject to paragraph 26 (anti-avoidance).

Revocation of option: lapse of more than 20 years since option had effect U.K.

25. (1) An option to tax any land exercised by any person (“the taxpayer”) may be revoked if the time that has lapsed since the day on which the option had effect is more than 20 years and—

(a) at the time when the option is to be revoked the conditions specified in a public notice are met in relation to the option (in which case, see sub-paragraphs (2) to (4)), or

(b) the taxpayer gets the prior permission of the Commissioners (in which case, see the remaining sub-paragraphs).

(2) If the conditions specified in the public notice are met in relation to the option, the revocation has effect only if notification of the revocation is given to the Commissioners.

(3) The notification must—

(a) be made in the specified form,

(b) state the day from which the option is to be revoked (which may not be before the day on which the notification is given),

(c) contain a statement by the taxpayer certifying that, on that day, the conditions specified in the public notice are met in relation to the option, and

(d) contain other information specified in a public notice.

(4) If—

(a) notification of the revocation of an option is given to the Commissioners on the basis that the conditions specified in the public notice were met in relation to the option, but

(b) it is subsequently discovered that those conditions were not met in relation to the option,

the Commissioners may nonetheless treat the option as if it had been validly revoked in accordance with this paragraph.

(5) An application for the prior permission of the Commissioners must—

(a) be made in a form specified in a public notice,

(b) contain a statement by the taxpayer certifying which (if any) of the conditions specified in the public notice under sub-paragraph (1)(a) are met in relation to the option, and

(c) contain other information specified in a public notice.

(6) If the taxpayer gets the prior permission of the Commissioners for the revocation of an option, the option is revoked from—

(a) the day on which the Commissioners give their permission, or

(b) such earlier or later day [F12 or time as they may] specify in their permission.

(7) The Commissioners may specify an earlier day [F13 or time] only if—

(a) the taxpayer has purported to give a notification of the revocation of the option,

(b) the conditions specified in the public notice are not, in the event, met in relation to the option, and

(c) the Commissioners consider that the grounds on which those conditions are not so met are insignificant.

[F14 (8) The Commissioners may specify a day or time under sub-paragraph (6)(b) by reference to the happening of an event or the meeting of a condition.]

(9) The Commissioners may specify conditions subject to which their permission is given and, if any of those conditions are broken, they may treat the revocation as if it had not been made.

Textual Amendments

F12 Words in Sch. 10 para. 25(6)(b) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 5(2)

F13 Words in Sch. 10 para. 25(7) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 5(3)

F14 Sch. 10 para. 25(8) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 5(4)

Revocation of option under paragraph 22(2) or (3) or 24: anti-avoidance U.K.

[F15 26. (1) Sub-paragraphs (2) and (3) of paragraph 22 (revocation of option to tax where a real estate election is made) do not apply if condition A or B is met.

(2) Paragraph 24 (lapse of option to tax) does not apply if condition A, B or C is met.

(3) Condition A is that—

(a) the opter, or a relevant associate of the opter, disposes of a relevant interest in the building or land before the relevant time, and

(b) at the relevant time, a supply for the purposes of the charge to VAT in respect of the disposal—

(i) is yet to take place, or

(ii) would be yet to take place if one or more conditions (such as the happening of an event or the doing of an act) were to be met.

(4) Condition B is that—

(a) the opter is a body corporate that was, at any time before the relevant time, treated under sections 43A to 43D as a member of a group (“the group”), and

(b) before the relevant time, a relevant associate of the opter in relation to the building or land ceased to be treated under those sections as a member of the group without at the same time meeting the conditions in sub-paragraph (5).

(5) A person (“A”) meets the conditions in this sub-paragraph if—

(a) A has no relevant interest in the building or land,

(b) where A has disposed of such an interest, it is not the case that a supply for the purposes of the charge to VAT in respect of the disposal—

(i) is yet to take place, or

(ii) would be yet to take place if one or more conditions (such as the happening of an event or the doing of an act) were to be met, and

(c) A is not connected with any person who has a relevant interest in the building or land where that person is the opter or another relevant associate of the opter.

(6) Condition C is that the opter is a body corporate and, at the relevant time, a relevant associate of the opter in relation to the building or land—

(a) is treated under sections 43A to 43D as a member of the same group as the opter, and

(b) holds a relevant interest in the building or land or has held such an interest at any time within the previous 6 years.

(7) In this paragraph—

• “relevant interest in the building or land” means an interest in, right over or license to occupy the building or land (or any part of it);

• “the relevant time”, in relation to any option to tax, means the time from which the option would (but for this paragraph) have been treated as revoked as a result of paragraph 22(2) or (3) or 24;

• “opter” means the person who exercised the option to tax in question.]

Textual Amendments

F15 Sch. 10 para. 26 substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 6

Exclusion of new building from effect of an option U.K.

27. (1) This paragraph applies if—

(a) a person (“the taxpayer”) has at any time opted to tax any land,

(b) at any subsequent time the construction of a building (“the new building”) on the land begins, and

(c) no land within the curtilage of the new building is within the curtilage of an existing building.

(2) The taxpayer may exclude—

(a) the whole of the new building, and

(b) all the land within its curtilage,

from the effect of the option if notification of that exclusion is given to the Commissioners.

(3) The exclusion has effect from the earliest of the following times—

(a) the time when a grant of an interest in, or in any part of, the new building is first made,

(b) the time when the new building, or any part of it, is first used,

(c) the time when the new building is completed.

(4) The notification of the exclusion must—

[F16 (za) be given before the end of the period of 30 days beginning with the day on which it is to have effect or such longer period as the Commissioners may in any case allow,]

(a) be made in a form specified in a public notice,

[F17 (b) state the time from which it is to have effect, and]

(c) contain other information so specified.

(5) Sub-paragraphs (4) to (6) of paragraph 18 (meaning of “building”) apply for the purposes of this paragraph as they apply for the purposes of that paragraph.

(6) For the purposes of this paragraph the reference to the construction of a building is to be read without regard to Note (17) or (18)(b) of Group 5 of Schedule 8 (which would otherwise apply as a result of paragraph 33 of this Schedule).

(7) The Commissioners may publish a notice for determining the time at which the construction of a building on any land is to be taken to begin for the purposes of this paragraph.

Textual Amendments

F16 Sch. 10 para. 27(4)(za) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 7(2)

F17 Sch. 10 para. 27(4)(b) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Value Added Tax (Buildings and Land) Order 2009 (S.I. 2009/1966), arts. 1(1), 7(3)

Pre-option exempt grants: requirement for prior permission before exercise of option to tax U.K.

28. (1) This paragraph applies if—

(a) a person wants to exercise an option to tax any land with effect from a particular day,

(b) at any time (“the relevant time”) before that day the person has made, makes or intends to make an exempt supply to which any grant in relation to the land gives rise, and

(c) the relevant time is within the period of 10 years ending with that day.

(2) The person may exercise the option to tax the land only if—

(a) the conditions specified in a public notice are met in relation to the land, or

(b) the person gets the prior permission of the Commissioners (but see also paragraph 30).

(3) The Commissioners must refuse their permission if they are not satisfied that there would be a fair and reasonable attribution of relevant input tax to relevant supplies.

(4) For this purpose—

• “relevant input tax” means input tax incurred, or likely to be incurred, in relation to the land, and

• “relevant supplies” means supplies to which any grant in relation to the land gives rise which would be taxable (if the option has effect).

(5) In deciding whether there would be a fair and reasonable attribution of relevant input tax to relevant supplies, the Commissioners must have regard to all the circumstances of the case.

(6) But they must have regard in particular to—

(a) the total value of any exempt supply to which any grant in relation to the land gives rise and which is made or to be made before the day from which the person wants the option to have effect,

(b) the expected total value of any supply to which any grant in relation to the land gives rise that would be taxable (if the option has effect), and

(c) the total amount of input tax incurred, or likely to be incurred, in relation to the land.

Paragraph 28: application for prior permission U.K.

29. (1) An application for the prior permission of the Commissioners under paragraph 28 must—

(a) be made in a form specified in a public notice,

(b) contain a statement by the applicant certifying which (if any) of the conditions specified in the public notice under paragraph 28(2)(a) are met in relation to the land, and

(c) contain other information specified in a public notice.

(2) The Commissioners may specify conditions subject to which their permission is given and, if any of those conditions are broken, they may treat the application as if it had not been made.

(3) If the applicant (A) gets the prior permission of the Commissioners, A is, as a result of this sub-paragraph, treated for the purposes of this Part of this Schedule as if A had exercised the option to tax the land with effect from—

(a) the start of the day on which the application was made, or

(b) the start of any later day specified in the application.

Paragraph 28: purported exercise where prior permission not obtained U.K.

30. (1) This paragraph applies if—

(a) an option to tax was purportedly exercised in a case where, before the option could be exercised, the prior permission of the Commissioners was required under paragraph 28, and

(b) notification of the purported option was purportedly given to the Commissioners in accordance with paragraph 20.

(2) The Commissioners may, in the case of any such option, subsequently dispense with the requirement for their prior permission to be given under paragraph 28.

(3) If the Commissioners dispense with that requirement, a purported option—

(a) is treated for the purposes of this Part of this Schedule as if it had instead been validly exercised, and

(b) has effect in accordance with paragraph 19.]