As tax forms go, the 1614D to Disapply an Option to tax is probably one of the most straight forward.
The 1614D is used so that the seller won’t charge VAT when selling a building which has been opted to tax where the buy intends to convert to residential.
Basically it says – who are you, who is the seller and what is the property? – that’s nice and simple, what could possibly go wrong?
Its great for the purchaser as they don’t have to wait to recover the VAT.
The potential downside is for the seller, let say you originally bought the property for your business and only later decided to rent it out and Opt to tax. The issues are:
- Because its an exempt supply the seller can’t recover any VAT related to the sale
- The biggest potential problem is the Capital Good scheme which have a 10 year adjustment period, if you sell within this period you will have to pay back to HMRC some of the VAT
If you acquire or create an expensive capital asset, or already have one when you register for VAT, you may have to adjust the amount of VAT you reclaim. You do this by using the Capital Goods Scheme, which allows you to spread the initial VAT claimed over a number of years. You can reclaim more if the proportion of your taxable supplies increases, you’ll have to repay some if it decreases. Taxable supplies are the sales that you make which are standard, reduced or zero-rated.
You’ll have to use the Capital Goods Scheme if you spend £250,000 (excluding VAT) or more on:
- buying land, a building or part of a building or civil engineering work
- constructing a building or civil engineering work
- refurbishing, fitting out, altering or extending a building or civil engineering work
Civil engineering work includes things like roads, bridges, golf courses, running tracks and the installation of pipes for connecting to mains services.
https://www.gov.uk/guidance/vat-capital-goods-scheme-and-capital-assets
