ICAEW.com works better with JavaScript enabled.
Exclusive content
Access to our exclusive resources is for specific groups of students, users, members and subscribers.
Q: My client is a fully taxable manufacturing company. They are to buy a 2nd factory to operate out of and will wholly occupy this. The factory is £165,000 plus VAT because the seller has opted to tax (OTT). Am I correct that the client will need to OTT this as well to enable them to reclaim this VAT?

A: You are correct that the seller’s OTT does not carry over to the client; each business has to make its own OTT if it wishes to. However, as the client intends to wholly occupy the factory and use it solely to make taxable supplies, it will be able to recover the VAT on the purchase of the building without making an OTT.

An OTT would only normally be worth considering if a business plans to make supplies of the property e.g. sell or rent out all or part of the building. This is generally exempt income, which creates input tax recovery issues, but an OTT makes it standard-rated (unless disapplied for anti-avoidance, charitable or residential use reasons), thereby allowing input tax recovery.

Disclaimer

These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.

About Markel Tax

Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.