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Input tax on property costs when no rent had been charged

26 October 2020
Issue: 4766 / Categories: Tax cases
C and S Slaymark (TC7709)

The partnership bought a commercial property in 2008 and made an option to tax election. It claimed input tax on the purchase price.

In April 2011 the partnership deregistered from VAT on the basis that taxable sales of rent were less than the deregistration threshold. When they applied to deregister the partners incorrectly stated that they had never opted to tax the property. HMRC noted that this statement was incorrect and that no output tax had been declared on the final VAT return for the property it still owned. HMRC issued a market-value assessment in February 2012 but later agreed to reinstate the VAT registration on 14 March 2012.

The partnership did not generate any rental income between the purchase date in 2008 and when it was sold for £1.5m plus VAT in October 2015. It claimed input tax on many costs relevant to the building when it was...

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