UK, September 2026 - Buying a property looks straightforward until VAT enters the conversation, and by then it is often too late to change the outcome. Allenby Accountants is urging buyers, investors and developers to get their VAT position clear before they exchange contracts, not after, warning that a handful of overlooked questions can add tens of thousands of pounds to the cost of a deal.

Unlike most transactions, VAT on property in the UK is not fixed by the type of building alone - it depends on age, use, and choices the seller may have made years before the sale ever came up. A brand new residential build is normally zero-rated. An older commercial building is generally exempt from VAT unless the seller has opted to tax it, in which case VAT is generally charged at the standard rate. Getting this wrong before completion is far harder - and far more expensive - to put right afterwards.

The first question Allenby Accountants asks every buyer is whether the seller has opted to tax the property. An option to tax turns an otherwise VAT-exempt commercial building into a standard-rated sale, meaning VAT is added to the purchase price. Buyers who assume a property is VAT-free, only to be handed a VAT invoice at completion, can find themselves needing tens of thousands of pounds in cash they had not budgeted for - and a Stamp Duty Land Tax bill calculated on the VAT-inclusive price on top.

Whether that VAT can be recovered depends entirely on what the buyer plans to do with the property. A business intending to use or let the property for taxable purposes may generally be able to recover the VAT it pays, subject to the normal VAT recovery rules and, where required, an effective option to tax. A buyer planning residential lettings will generally be unable to recover the VAT, turning it into a real, permanent cost rather than a timing issue. There is also a route that may prevent VAT from being charged on the sale: a transaction may qualify for Transfer of a Going Concern (TOGC) treatment where a property rental business is transferred and the relevant conditions are met. Where the property is subject to an option to tax, the buyer may also need to have an effective option to tax and meet the relevant notification requirements before completion.

Ahead of any offer, Allenby Accountants recommends buyers get answers to four questions in writing:

•Has the seller opted to tax the property, and if so, when - the date affects whether the option can be disapplied.
•Is the intended use of the property taxable, exempt, or mixed, and does that match how the buyer plans to recover the VAT?
•Does the transaction meet the conditions for TOGC treatment, including the buyer's VAT position and, where required, an effective option to tax and the necessary notification?
•What impact will the VAT treatment have on Stamp Duty Land Tax, since SDLT is charged on the VAT-inclusive price?

“By the time we’re asked to fix a VAT problem on a property, the contract has usually already been signed,” said Gupta of Allenby Accountants. “Every one of these questions needs answering before exchange, not after.”

Because VAT treatment can have a significant impact on the cost and structure of a property transaction, Allenby Accountants says buyers should bring in property accountants before heads of terms are signed - rather than after completion - to identify potential VAT issues early.

About Allenby Accountants

A London-based accounting firm, Allenby Accountants, offers specialised services to businesses in an array of industries, including restaurants, SMEs, and contractors. With a concentration on client-first methods and technology-driven solutions, Allenby Accountants helps businesses in achieving long-term growth, efficiency, and compliance.

Company Address:

Address: Brook House 54a, Cowley Mill Road Uxbridge UB8 2FX
Phone No: 0208 914 8887
E-mail: [email protected]
Website: https://www.allenbyaccountants.co.uk/