Last updated: 14 October 2026
Can you avoid the VAT hit when buying your office building?
Sometimes. If the seller has opted to tax the building, VAT at 20% is charged on the price. You can usually reclaim it if you make taxable supplies, but you still have to fund it until HMRC repays you, and stamp duty land tax (SDLT) is charged on the VAT-inclusive price. Ways to avoid or reduce the cost are asking the seller to revoke the option, if it is more than 20 years old, or structuring the deal as a transfer of a going concern (TOGC).
Option 1: revoking the option to tax
- An option to tax can be revoked once it’s been in place for 20 years
- If the option is revoked, the sale is usually VAT-exempt
- The seller may refuse, as revoking could mean repaying VAT they reclaimed on the building
Option 2: transfer of a going concern
A sale of a let building can be outside the scope of VAT if it’s a TOGC. Conditions include:
| Condition | What it means |
| There’s a property letting business | The building is let to a tenant |
| The buyer carries on the same business | The buyer continues letting it |
| The buyer opts to tax | Before the tax point, and notifies HMRC |
| The buyer confirms the option won’t be disapplied | Written confirmation to the seller |
If you are the tenant buying your own office, the lease would merge with the freehold, so no letting business continues. One solution is for a separate entity, such as a property company owned by the same people, to buy the building and keep letting it to your trading company. HMRC’s VAT Notice 700/9 sets out the conditions.
Option 3: fund the VAT efficiently
If neither works, you can minimise the cash cost:
- Register for VAT before completion and time the purchase so that the VAT return is filed soon after
- Ask HMRC for monthly returns
- Arrange a short-term bridging loan to cover the VAT
Example
Riverside Architects Ltd is buying its office for £800,000 plus £160,000 VAT. The SDLT on £960,000 is higher than on £800,000, an extra £8,000 at the 5% rate. If the purchase is structured through a new property company, which continues to let the building to Riverside Architects, it could be a TOGC: no VAT is charged and SDLT is only on £800,000.
Capital Goods Scheme
Buildings costing £250,000 or more fall within the Capital Goods Scheme. The VAT you recover is reviewed over 10 years. If your use changes, for example to make exempt supplies, you might have to repay part of it.
Things to check
- Is the building new (under 3 years old)? Then VAT is compulsory
- Has the seller opted to tax?
- Will you make taxable or exempt supplies from the building?
Frequently asked questions
Can I reclaim VAT if I’m partly exempt?
Only partly, under the partial exemption rules.
Does SDLT apply to the VAT?
Yes, SDLT is charged on the VAT-inclusive price.
Can I opt to tax myself?
Yes, and this lets you charge VAT on rents.
What if the TOGC conditions fail?
VAT will be due, and penalties may apply.
Related: VAT on equipment bought before registering, import VAT as input tax and calculating VAT for your business.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT on commercial property. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
