Property types and scenarios

VAT When Buying Premises for Your Own Business

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Most commentary on commercial property VAT is written for investors. If you are buying premises for your own business, two things change — and one of them can turn the VAT from a timing problem into a permanent cost.

The question that decides everything

Not "is VAT payable?" but "does my business make taxable supplies?"

For a manufacturer, a logistics operator, a retailer or a professional services firm, the VAT is a cash-flow issue and nothing more. For a dental practice, an insurance broker or an independent school, it may be an unrecoverable 20% on the price of the building.

That distinction is worth establishing before you offer, not after.

Why TOGC rarely helps you

Investors often escape the VAT through a transfer of a going concern. Owner-occupiers usually cannot.

TOGC generally requires a property letting business to transfer and continue. If you are buying a let building in order to move your own operations into it, the lettings end on completion — the business does not continue, and the treatment fails.

So the route that removes the VAT entirely for an investor is typically unavailable to you. Plan on paying it.

The structuring question

Two common approaches, with different VAT consequences:

Buy in the trading company. Simple. If the trading company is fully taxable, the VAT is recoverable through its existing registration and the reclaim benefits from an established filing history — which tends to mean faster repayment.

Buy in a separate entity that leases to the trade. Common for asset protection and succession planning. But the property company's supply is a lease, which is exempt by default. To recover the VAT on the purchase, that company will usually need to opt to tax and charge VAT on the rent — which is fine if the trading company can recover it, and a real cost if it cannot.

This is a decision with tax, lending and VAT consequences pulling in different directions. It is worth proper advice rather than a default.

The cash-flow reality

Even where recovery is clean, the money still goes out first.

On an £800,000 premises purchase with VAT, you need £160,000 on completion day, on top of the deposit, fees and stamp duty — and you get it back one to three months later.

For an owner-managed business this is often the hardest part. That capital is usually working capital, and taking it out of the business for a quarter to buy a building is precisely when a business can least afford it, because it has just taken on a mortgage too.

What to do, in order

1. Establish whether your business makes taxable supplies. This determines whether VAT is a timing cost or a real one.
2. Confirm the VAT position of the property from the contract, in writing.
3. Decide the buying structure with your accountant, before you offer.
4. Make sure the buying entity is VAT registered before completion.
5. Budget SDLT on the VAT-inclusive figure. That extra stamp duty is never recoverable, whatever your recovery position.
6. Plan the funding for the VAT, so buying the building does not drain the business that has to operate from it.

This guide is general information, not tax advice. Recovery depends on your business's VAT position and the buying structure — take advice before you offer.