The option to tax anti-avoidance provisions in VATA 1994, Sch 10, paras 12 to 17 are intended to reduce the risk of partly exempt businesses and other organisations that are not entitled to recover all of the VAT on property related costs from entering into arrangements to obtain a VAT cash flow advantage. An intention to obtain a VAT cash flow advantage is not, however, a requirement for the anti-avoidance provisions to apply. HMRC acknowledges in VAT Manual VATLP23100 that some arms length commercial arrangements are caught by the anti-avoidance test.
In relation to each grant it is necessary to consider the person(s) that will be in occupation and the use that will be made of the property (see VAT Manual VATLP23500).
What is the effect of the option to tax anti-avoidance provisions?
An option to tax is excluded from having effect (disapplied) in relation to a grant of property if the following conditions are all met:
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