Property hub / Commercial VAT and TOGC
Will VAT be charged on this commercial property?
Whether VAT is charged, whether the sale can be a transfer of a going concern (TOGC), and what VAT does to your stamp duty and cash.
Checked against legislation and HMRC guidance2026/27 ratesUpdated 3 October 2026
Your plans
Going concern conditions (buyer)
Usually completion, or earlier if a deposit is paid to the seller. Safest before exchange.
Usually yes if you opt to tax and charge VAT on the rent.
Loan, fees and VAT return dates
Cash on completion, with and without VAT
When the VAT comes back
VAT on commercial property explained
Selling commercial property is normally exempt from VAT. It becomes standard-rated at 20% when the seller has opted to tax the building, or when the freehold of a new building (completed in the last three years) is sold. A let building sold with its tenants can be a transfer of a going concern, with no VAT at all, if the buyer meets every condition in time.
The TOGC conditions for a let building
- The building is sold with its tenants and the buyer carries on letting it, the same kind of business, with no significant break.1
- The buyer is VAT registered, or required to be, at the time of the transfer.2
- The buyer opts to tax and notifies HMRC no later than the "relevant date": the time of supply, normally completion, or earlier if a deposit is paid to the seller or the seller's agent.3
- The buyer tells the seller in writing that its option will not be disapplied by the anti-avoidance rule.4
A transfer of a going concern is not a choice: it applies whenever the conditions are met, and depends on the facts. If a condition is missed, the sale is taxed in the normal way. If VAT is charged on a sale that turns out to be a TOGC, the buyer cannot reclaim it and the seller must refund it.5
Why VAT increases your stamp duty
Stamp duty, LBTT and LTT are charged on the price including any VAT. On a TOGC there is no VAT, so the stamp duty is lower as well. That saving is permanent: you never get the extra stamp duty back.6
Converting to homes
If you intend to convert the building into dwellings and give the seller a certificate (form VAT1614D) before the price is fixed, the seller's option does not apply and no VAT is charged on the price.7 The building works can qualify for 5% VAT. The first sale or long lease of a converted dwelling can be zero-rated, so VAT on the conversion can be reclaimed if you sell the new homes or grant long leases of them. Letting them on ordinary tenancies is exempt, so the VAT on the works is then not recoverable.8
Common questions
Will my lender fund the VAT?
Your lender may lend only on the net price, so the VAT has to come from your own cash or a short-term VAT loan until HMRC repays it. This tool shows the cash on completion both ways and the cost of borrowing the VAT.
How long does it take to get the VAT back?
You reclaim it on the VAT return for the period you completed in. The return is due one month and seven days after the period ends, and HMRC usually repays within 30 days of receiving it. Monthly returns are normally allowed for regular repayment traders and can shorten the wait.
Is SDLT charged on the VAT?
Yes, where VAT is chargeable on the price. On a valid transfer of a going concern no VAT is due, so stamp duty is charged on the price alone.
What is the Capital Goods Scheme?
If you buy a building with VAT for £600,000 or more (from 29 July 2026; £250,000 before), your VAT reclaim is reviewed each year for ten years. If your use of the building changes, for example to exempt lettings, part of the VAT can become repayable.
Sources (8)
- Value Added Tax (Special Provisions) Order 1995 (SI 1995/1268), art 5(1); HMRC, VAT Notice 700/9, paras 6.1 and 7.2.
- VAT Notice 700/9, para 2.2.4.
- SI 1995/1268, art 5(2A)(a) and (3); HMRC, VAT Notice 742A, para 4.2.
- SI 1995/1268, art 5(2A)(b) and (2B).
- VAT Notice 700/9, para 2.1.
- Finance Act 2003, Sch 4 para 2; HMRC, Stamp Duty Land Tax Manual, SDLTM03800; LBTT (Scotland) Act 2013, Sch 2 para 2; LTT and Anti-avoidance of Devolved Taxes (Wales) Act 2017, Sch 4 para 2.
- Value Added Tax Act 1994, Sch 10 paras 5 and 6; VAT Notice 742A, paras 3.4 and 3.4.3.
- VATA 1994, Sch 7A Group 6 and Sch 8 Group 5 item 1(b); HMRC, VAT Notice 708, sections 5 and 7.
Exchanging soon?
Whether VAT is charged on a property is decided by what happens before exchange. A short call can confirm the position on the VAT and the stamp duty that follows from it.