The following supplies are exempt (s 94(2)):
A person making an exempt supply of property, may, together with the acquirer of the property, make a joint option for taxation. In such a case, the acquirer is accountable for the VAT (s 94(5)-(6)).
The supply of a developed property which is new and unused is taxable. Broadly, a property is new if it is developed in the five years prior to its disposal and unoccupied.
A landlord may opt to charge VAT on a letting of commercial property (s 97). Such an option is exercised by including an appropriate provision in the letting agreement. The option ceases if the landlord:
A landlord may not opt to tax a letting to a connected person, unless the connected tenant uses the property for an activity in relation to which he is entitled to 90% deductibility.
A property’s tax-life (adjustment period) is generally 20 years (10 years in the case of a refurbished property).
Deductible VAT is adjusted for each year (interval) of the property’s VAT life by comparing the VAT deducted on acquisition with the proportion of taxable use during the initial interval.
Depending on whether taxable use has increased or decreased, the VAT deduction for that interval will decrease or increase.
Where a person with full VAT recovery sells a property, but did not reclaim VAT on the acquisition of the property, he can get a full VAT credit for the unclaimed VAT, scaled back in accordance with the number of years elapsed since the property was acquired.
A property owner must keep a capital good record for each capital good (s 64).