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VAT on Commercial Property

understanding VAT on commercial property

Up to 100% VAT advances within 48 hours

Adsum provides VAT funding pre-completion of the commercial property purchase

Reduce your equity requirement by up to 50%

Adsum is the UK’s leading specialist VAT service provider, offering a simple, low-cost service to property companies like yours. We fund the VAT payable on the property acquisition, handle all the tax admin and claim the VAT back from HMRC meaning you don't need to tie up your own funds (or commit to additional expensive finance) for the 2-3 months it takes to claim the VAT back from HMRC and/or incur any expensive tax advisory fees.
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Market-leading service

Adsum leads the market in VAT funding services. We're committed to providing our customers with a simple, low-cost solution with the best service and value on the market.

100% VAT funding

Adsum provides up to 100% of the funds to cover the VAT payable on completion of your acquisition, in as little as 48 hours.

Tax admin handled

With three decades of VAT expertise, our team of experts take care of all the VAT compliance, recovery and administration associated with your commercial property purchase.

Trusted by the FTSE 250

Since 2019, we've helped 100s of UK businesses and property developers of all sizes secure their property acquisitions - from listed companies to first-time developers.

“Securing VAT facilities from conventional debt lenders within the tight timeframes has been increasingly challenging. Working with the Adsum team, however, was a pleasure as they operated at an accelerated pace, delivered exceptional service and ensured we met our completion deadline.”
North Wind Capital

Understanding VAT on Commercial Property

The basics

VAT on commercial property purchases and transactions is complex. Generally, the sale or lease of commercial property is exempt from VAT, meaning neither a purchaser nor a tenant would typically pay VAT. This exemption includes exchanges of interests, rights over, or licenses to occupy commercial properties. However, there are exceptions, such as properties that are new (less than three years old) or when the vendor or landlord has opted to charge VAT, often in cases of refurbished properties.

How VAT affects property transactions

The implications for buyers and sellers are significant. For a property exempt from VAT, vendors cannot recover VAT on related costs, impacting their financial calculations. Standard-rated transactions, however, include VAT, affecting buyers’ cash flow. Understanding these dynamics is crucial for effective financial planning and compliance.

Electing to charge VAT

Commercial property owners can opt to charge VAT at the standard rate (currently 20%) when selling or leasing their property. This decision, which must be notified to HMRC within 30 days, allows them to recover VAT on related property costs. However, it’s largely irrevocable for 20 years and doesn’t follow the property to the next owner. This choice can impact the marketability of the property, especially to sectors like banks and charities, who might not be able to recover VAT.

Transfer of a Going Concern (TOGC)

In cases where a property rental business is sold and the buyer intends to continue the same business, the transaction may qualify as a TOGC. This classification is outside the scope of VAT, offering an attractive option for buyers. However, for TOGC conditions to be met, the buyer must mirror the seller’s VAT position by the date of transfer.

VAT on the sale of new commercial property

New commercial properties (less than three years old) attract VAT at the standard rate. Buyers intending to rent out new properties often elect to charge VAT on future rents and sales to recover the VAT incurred during acquisition.

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How it works

Unlock the full potential of your property investments with our expert-backed VAT solutions—designed to equip you financially and make you compliance-proof.
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1. Get in touch & receive a quote

Get in touch to receive market-leading terms within the hour.

Our team of experts will guide you through the process and make sure funds are in your solicitor’s account prior to completion.

Receive a free, no obligation quote
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2. Pre-completion VAT funding

Adsum provides the necessary funds cover the VAT payable on completion in as little as 48 hours, freeing your capital for the 2-3 months it takes to reclaim the VAT.

All VAT compliance, admin and recovery is handled by Adsum’s team of experts.

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3. InstantVAT Refunds

During the development of your new property, you can boost your cashflow and receive your VAT refunds up to 75% faster than your peers.

Join over 1,500 businesses receiving their refunds in as little as 60 minutes.

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What people ask us about commercial property VAT

Do you pay VAT on commercial property?

All commercial properties are VAT exempt at the point of sale. However, commercial property owners do have the option to tax, which means charging VAT at 20%. New commercial property (defined as property that is less than three years old) is also liable to VAT at the 20% rate. If you do have to pay VAT on the commercial property you’re purchasing, and you’re eligible for a VAT refund, a VAT advance courtesy of Adsum means you’ll receive the money in advance of HMRC’s reimbursement and can use it to cover the cost of the VAT you have to pay on completion of the property purchase.

How do I avoid paying VAT on commercial property?

You cannot avoid paying VAT if it is due. However, if the property you want is opted to tax or a new build, you can use intelligent funding solutions to make the VAT payment, such as Adsum’s commercial property tax funding. As we provide you with an advance on your VAT refund from HMRC, your cash flow will not be affected despite the VAT charge.

Is there VAT on the sale of a commercial property?

VAT has to be charged on the sale of a commercial property if the option to tax has been made on it. If so, the option to tax is largely irreversible and this is not at the discretion of the seller.