Four tax questions decide the economics of a commercial property deal, and three of them are fixed permanently at completion. SDLT on the premium and separately on the rent. VAT, and whether a let property transfers as a going concern. Capital allowances, which vanish entirely if a two-year deadline is missed. And rollover relief on the gain, which has a four-year claim window.
SDLT: two calculations, not one
On non-residential property the bands are 0% to £150,000, 2% on £150,001 to £250,000, and 5% above £250,000.
On a new lease there is a second, separate calculation on the net present value of the rent: 0% up to £150,000, 1% on £150,001 to £5,000,000, and 2% above £5,000,000. No SDLT is payable on the rent if the NPV is below £150,000.
The two are computed independently and added — the rent is not taken into account in determining the tax on the premium. Return and payment are due within 14 days of the effective date.
VAT: exempt unless opted, and the new-building exception
The grant, assignment or surrender of an interest in land is exempt under Schedule 9 Group 1, which is why commercial property sales are exempt unless the seller has opted to tax. Once opted, supplies of the opted land are normally standard-rated.
One exception catches people out. Selling the freehold of a new or partly completed commercial building is standard-rated regardless, unless it qualifies as a transfer of a going concern — and a building is "new" for three years from completion.
On the option itself: notify HMRC in writing on form VAT1614A, normally within 30 days of the decision. Note that HMRC no longer issues acknowledgement letters — an email submission gets an automated receipt and a postal one gets nothing, so keep your own evidence. The option can be revoked within a six-month cooling-off period if no tax has become chargeable, or after 20 years subject to conditions. And it does not pass to a buyer: a purchaser who wants the property opted must opt themselves.
TOGC on a let property
Where a tenanted commercial property is sold, TOGC treatment takes the transaction outside VAT. The general conditions are that the assets are sold as part of the going concern, the buyer intends to use them in carrying on the same kind of business, and where the seller is a taxable person the buyer must be too.
For land there are extra conditions, and they are where deals fail:
- The seller must have opted to tax and the option must not be disapplied;
- The buyer must have opted to tax, and must notify the seller that their option will not be disapplied;
- The buyer must notify HMRC no later than the relevant date.
The "relevant date" is the date the grant would have been treated as made, or the earliest such date — typically completion, but a deposit creating a tax point brings it forward. HMRC's position is unforgiving: if the purchaser has not opted and notified before the relevant date, the supply cannot qualify as a TOGC regardless of any later option.
If TOGC fails, two things happen. VAT is chargeable, and if it is charged when it should not have been, the buyer cannot reclaim it as input tax. And the SDLT bill rises — chargeable consideration includes VAT payable on the transaction, so SDLT is charged on the VAT-inclusive price. On a £3m purchase that is an extra £30,000 of SDLT on top of the £600,000 of VAT. An option taking effect after the effective date does not add the VAT to chargeable consideration.
Capital allowances: the two-year cliff
Fixtures in a commercial building carry allowances that can be worth a substantial fraction of the price, and who gets them is decided by a section 198 election — a joint election fixing the amount treated as expenditure on the fixture, which cannot exceed the seller's original qualifying expenditure or the actual sale price.
Two requirements have to be satisfied, and both bite on the buyer:
- The pooling requirement — the historic expenditure must have been allocated to a pool in a chargeable period beginning on or before the day the past owner ceased to be treated as owner, or a first-year allowance claimed;
- The fixed value requirement — a relevant apportionment must have been made, by tribunal determination or joint election, within two years of the buyer acquiring the interest.
Fail either and the consequence is stated in the legislation: the new expenditure is to be treated as nil. The buyer gets no allowances on those fixtures, and nor does any subsequent owner. This is a permanent extinction of value, not a deferral.
The election notice must specify the amount fixed, the names of all parties, information identifying the plant and machinery, the relevant land, the interest acquired, and each party's UTR. Raise it in heads of terms, not in the completion bundle.
Rollover relief on the gain
Business asset rollover relief defers the gain where the proceeds are reinvested in new qualifying assets — land and buildings, and fixed plant or machinery.
The reinvestment window runs from 12 months before to three years after the disposal. The business must be trading at both points, and the old assets must have been used only for the purposes of the trade throughout the period of ownership. For land and buildings the qualifying class requires them to be occupied as well as used only for trade purposes — which is why a landlord cannot use this relief at all.
The claim time limit is four years from the end of the tax year in which the new asset was bought, or the old one sold if that was later. Where the replacement is a depreciating asset with an expected life under 60 years, the gain is held over for up to ten years rather than rolled over. Partial relief applies where only part of the proceeds are reinvested.
One more number: the capital goods scheme
The threshold for land, buildings and civil engineering works rose from £250,000 to £600,000 excluding VAT, effective 29 July 2026, with a 10-interval adjustment period. The same change removed computers and computer equipment from the scheme entirely.
Items already in the scheme under the old threshold stay in it until the end of their adjustment period. On a sale mid-period a final adjustment is made, with remaining complete intervals treated as 100% taxable if the sale was taxable and 0% if exempt.
The sequence that works
Raise capital allowances and the VAT position in heads of terms. Establish before exchange whether the seller has opted, whether the buyer will, and whether TOGC is intended — and if it is, diarise the buyer's option and notification against the relevant date including any deposit. Then diarise the two-year fixtures deadline at completion and the four-year rollover claim window.
Our guide to real estate tax covers the holding-period position, and VAT on property purchase the recovery mechanics.
Acumon advises on commercial property transactions through property taxes, SDLT, capital allowances and property VAT advice, with tax due diligence on the deal itself. If contracts are out and nobody has mentioned fixtures, that is the item to raise this week.