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HMRC internal manual

VAT Land and Property

HM Revenue & Customs
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Option to tax anti-avoidance - funding and financing: how the law works

An option to tax is disapplied in relation to a grant (such as the grant of a lease) if it is made by the owner of the land, building or part of the building which is or will become a capital item within the capital goods scheme, and at the time of the grant it is the intention of:

  • the owner, or
  • the person who financed the owner’s development

that either of them, or any person connected with them, is to occupy the building otherwise than wholly or substantially wholly for taxable business purposes. This is the effect of Schedule 10, paragraphs 12 to 17.