Why VAT matters in commercial property
Value Added Tax (VAT) is an indirect tax charged on most goods and services, collected by businesses on HMRC’s behalf. Property is one of the more complex areas of VAT: the default position for land and buildings is exempt, but a series of exceptions to this rule, the option to tax, the sale of new commercial buildings, transfers of a going concern (TOGC), and the Capital Goods Scheme, mean the right treatment depends on the specific facts of your transaction. We explain this in plain English and work with you to identify the treatment that applies.
Approached the right way, VAT on a property transaction is an opportunity rather than a risk. Agreeing the correct treatment upfront can improve cash flow, unlock input tax recovery, and keep your deal moving smoothly to completion. We work alongside you and your other advisers to agree the position before contracts are signed and identify the reliefs and elections that work in your favour.
How we support commercial property clients
Our VAT specialists work alongside your property, legal, and finance teams at every stage of the property lifecycle.
1. Option to tax
We advise on whether and when to opt to tax a property, prepare the forms and notify HMRC, and provide advice regarding the ongoing implications for lettings, service charges, and future sales. An option to tax is broadly fixed for 20 years and can affect how attractive the property is to buyers and tenants who cannot recover VAT, so it is worth thinking through before you commit.
2. Acquisitions, disposals & TOGC
We review the VAT position before exchange, including whether a sale qualifies as a Transfer of a Going Concern, so buyers and sellers agree the treatment upfront and have certainty from day one.
3. Capital Goods Scheme monitoring
For qualifying capital expenditure, we track use of the property over its adjustment period, calculate annual adjustments, and advise whether an adjustment is required when the property is sold.
4. Development & construction VAT
Construction of a new commercial building is standard rated at 20%, so the value lies in recovering that VAT rather than avoiding it. We advise on structuring development costs to maximise recoverable input tax, the reduced rate available on qualifying residential conversions, the VAT position on refurbishments and fit-outs, and the domestic reverse charge for construction services. Where a project scheme has a residential or charitable element, we identify the parts that may qualify for zero-rating or the reduced rate.
Why work with us on property VAT
✓ Deal-ready advice.
We work to your transaction timescales, so you have a clear VAT position in good time for exchange and completion.
✓ Joined-up with your wider advisers.
We liaise directly with your solicitors, agents, and lenders so the VAT treatment is reflected correctly in contracts and completion statements.
✓ Up to date on the rules.
Property VAT rules change regularly, including the 2026 Capital Goods Scheme update, and we track these, so your position stays current.
✓ HMRC-facing experience.
Where HMRC has questions about a property transaction, we manage the correspondence on your behalf and work through to a resolution.
Talk to our VAT team about your property transaction
Whether you’re buying, selling, developing, or leasing commercial property, get the VAT position agreed before you’re committed.
Get in touch with our expert team.