VAT on a commercial property
Most commercial property is exempt from VAT, unless the owner has opted to tax or the building is new. Stamp duty is charged on the price with any VAT, and that part never comes back.
Your answer
Enter the price or the yearly rent to see whether there's VAT, and what it does to stamp duty.
About this calculator
For businesses and investors buying or renting a commercial property (an office, shop, warehouse or similar) who want to know if there's VAT, whether it comes back and what it adds to stamp duty.
It covers wholly commercial property, with stamp duty for England and Northern Ireland. Mixed-use property, homes, and land tax in Scotland and Wales work differently.
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How it’s worked out
Selling or renting a commercial property is exempt from VAT, unless the owner has opted to tax, or you're buying the freehold of a building under 3 years old. Then it's 20%.
A let property sold with its tenant can be a transfer of a going concern (TOGC): outside VAT, if you're VAT-registered, carry on the letting and opt to tax before completion.
Stamp duty is worked out on the price plus any VAT, at 0% up to £150,000, 2% to £250,000 and 5% above. We show how much of it comes from the VAT.
Worked example
There's VAT of £200,000 on this £1,000,000 property, which you can reclaim.
Buying the freehold · an older building · owner has opted to tax · you can reclaim VAT · wholly commercial · England or Northern Ireland stamp duty
| The price, before VAT | £1,000,000 |
|---|---|
| Standard-rated: the seller has opted to tax | 20% |
| VAT: £1,000,000 × 20% | + £200,000 |
| The price with VAT | £1,200,000 |
| Stamp duty is charged on the price with VAT | £1,200,000 |
| 0% on the part up to £150,000 | £0 |
| 2% on the part from £150,001 to £250,000 | £2,000 |
| 5% on the part above £250,000 | £47,500 |
| Stamp duty to pay | £49,500 |
| Stamp duty on the price alone would be £39,500, so the VAT adds | + £10,000 |
Based on HMRC's VAT on land and property (Notice 742), opting to tax (Notice 742A) and going concern (Notice 700/9) guidance, and the non-residential stamp duty rates for England and Northern Ireland.
Questions people ask
If I can reclaim the VAT, does it matter?
Yes, two ways. You pay the VAT up front and wait for it to come back on your VAT return. And stamp duty is charged on the price with VAT, so on a large purchase you pay 5% stamp duty on the VAT too, which never comes back.
What is opting to tax?
An owner can choose to charge VAT on a commercial property (an option to tax), usually so it can reclaim VAT on its own costs. It must normally tell HMRC within 30 days of deciding. Once made, it covers the sale and the rent.
What if the seller opts to tax after we've completed?
VAT that's only due because of an option made after completion isn't added to the price for stamp duty. It's rare: ask your solicitor to confirm the seller's VAT position before exchange.
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