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21 July 2015
The rules on option to tax when land is purchased and sold several times.
After buying some land in 2004 my client made an option to tax election on it and claimed input tax. In 2007 he sold the land for a profit and charged VAT. In 2010 he bought back the same land with the exception of an area of less than one acre which was retained by the other party. He was again charged VAT on this land purchase – £100 000 plus VAT. This time he did not opt to tax it but he did reclaim input tax because he intended to make taxable supplies in the future. However he sold the land in March 2015 for £50 000 and treated the sale as exempt from VAT. No income was generated by the land between 2010 and 2015; it was unused for this period because my client was hoping its value would increase.
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