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Where Taxpayers and Advisers Meet

pre-option expenses

Posts: 70
Joined: Thu Jul 16, 2009 12:39 pm

pre-option expenses

Postby Nonimous » Thu Mar 14, 2019 5:44 pm

Client owns a pub and has let it to someone else to run a business in

Property was not opted. Client has signed a lease which is silent on whether VAT is due (lots of 'if's) and has had the first quarter of rent

Client has now realised that if they register for VAT and opt to tax then they can recover VAT on future refurbishments. The tenant is VAT registered and does not mind paying VAT as they can recover it.

Client has had an expensive bill for legal fees on this lease


I) Client I think cannot backdate the option to tax as they have already received one rent payment with no VAT

2) IClient should still get automatic permission to opt because they are not letting to a connected party , and once opted there is no intention to make exempt supplies

3) I wonder whether HMRC might allow some of the input tax on the legal fees under 'payback' para 13.9 of VAT notice 706 on the basis that the intention has changed?

Your thoughts are appreciated

Posts: 546
Joined: Wed Aug 06, 2008 3:09 pm

Re: pre-option expenses

Postby les35 » Thu Mar 14, 2019 7:45 pm

You cannot normally back-date an option to tax.
But, is the contract a rent/lease, or a licence to operate a business which will be taxable anyway.
Some paid-for professional advice Is essential on this type of arrangement.

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