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Is VAT due on this commercial property sale?
A general guide based on HMRC VAT Notices 742, 742A and 700/9.
When VAT applies to a commercial property sale
| Type of sale | VAT treatment |
|---|---|
| Freehold of a new commercial building, less than 3 years old | Standard-rated, 20% |
| Older commercial property, seller has not opted to tax | Exempt |
| Commercial property the seller has opted to tax | Standard-rated, 20% |
| Let property sold with its tenants as a going concern, conditions met | Not a supply for VAT: no VAT charged |
The option to tax
- Opting to tax makes the owner's sales and rents of that property standard-rated, so the owner can reclaim VAT on buying, building and running it.
- You normally notify HMRC within 30 days of making the decision.
- An option usually lasts at least 20 years and can only be revoked in limited circumstances.
- An option applies to the person who made it. A buyer does not inherit the seller's option, but needs to decide whether to opt themselves.
Selling as a transfer of a going concern
When a let property is sold with its tenants and the buyer carries on the letting business, the sale can be a transfer of a going concern, with no VAT. If the seller has opted to tax, the buyer must also opt to tax and notify HMRC by the relevant date, and confirm to the seller that their option has not been disapplied. If the conditions are not met, VAT is due on the sale, so take advice before completion.
How VAT affects the buyer
- VAT-registered buyers making taxable supplies can usually reclaim the VAT, but must fund it until they do.
- Buyers who cannot reclaim, such as some charities, insurers and banks, bear the VAT as a real cost.
- Stamp Duty Land Tax is charged on the price including any VAT, so a sale that avoids VAT through a going-concern transfer can also reduce SDLT.
- Later changes of use can mean adjusting the VAT reclaimed over several years under the capital goods scheme.
Reporting the sale on your VAT return
A standard-rated sale goes in Box 1 (the VAT) and Box 6 (the net price). An exempt sale goes in Box 6 only. A buyer's reclaim goes in Box 4, with the net price in Box 7. Swift VAT Pro files these figures from your spreadsheet.
Report the sale, file from your spreadsheet, from £5 a month
Put the sale in your spreadsheet with the VAT, total the nine boxes by formula, upload the CSV and file.
- Connect to HMRC on HMRC's own page with your Government Gateway sign-in. We never see that password.
- See your VAT periods, due dates, amounts owed and payments, read from HMRC.
- Upload your nine box totals as a CSV. Box 3 and Box 5 are worked out and every box is checked.
- Submit and keep HMRC's receipt. Reminder emails arrive before each due date.
No card needed · From £5 a month · Plans for up to 100 businesses · Filing through HMRC's MTD service since 2019
Final thoughts
Check three things before any commercial property sale: whether the building is new, whether the seller has opted to tax, and whether the sale can be a going concern. They decide whether VAT is charged, who can reclaim it, and how much SDLT is paid.
Disclaimer: This guide gives general information, not advice. Commercial property VAT is complex and the amounts are large. Always take professional advice before a sale or purchase.
Frequently asked questions
Checked against HMRC VAT Notices 742 (land and property), 742A (option to tax), 700/9 (going concern) and 706/2 (capital goods scheme). November 2026.
Is VAT charged on commercial property sales?
What is a new commercial building for VAT?
Can a commercial property sale avoid VAT as a going concern?
Does the option to tax pass to the buyer?
Is SDLT charged on the VAT?
Report the sale, file from your spreadsheet, from £5 a month.
Swift VAT Pro files your return to HMRC from the spreadsheet you already keep. From £5 a month.
No card needed · 2,900+ VAT returns filed since 2019