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Changes to Option to tax rules

The recent Budget announced changes to the rules for opting to tax property interests. Further details have now been published (BB24/08 and 03/08). The changes are due to come in on 1 June 2008 when the new legislation (rewritten Schedule 10 VAT Act 1994) becomes effective.

The changes are designed to simplify the complex rules and address some of the practical issues which have arisen since the option to tax was first introduced in 1989.

A summary of the main changes are:

  • New rules for relevant associates (VAT groups)
  • Certificates to disapply an option to tax for land sold to housing associations and buildings converted into dwellings
  • New rules for intermediaries supplying buildings to be converted into dwellings
  • Introduction of a “real estate election” (new way to opt to tax multiple property interests)
  • Changes to the “cooling off” and revocation period
  • Changes to the rules for obtaining permission prior to opting to tax
  • Revised definition of “occupation”
  • Changes to the scope of the option to tax
  • New appeal rights

The new rules and changes are quite detailed and will mean that businesses should review their internal procedures, particularly those with large property portfolios. Further simplification changes are also expected.



Date: 28th April, 2008
Author: Jane Stacey


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