ACCA Advanced Taxation (ATX) Practice Exam

In which circumstances should VAT be charged on the sale of commercial buildings?

1. Only if the building is older than three years

2. Only if the building has not been used

3. If the owner opts to tax or if the building is less than three years old

4. Only if the buyer is a business

The correct answer is: If the owner opts to tax or if the building is less than three years old

VAT should be charged on the sale of commercial buildings if the owner opts to tax the sale or if the building is less than three years old. This aligns with the principles of VAT treatment for properties in many jurisdictions. When a commercial property is sold, the standard treatment under VAT law generally requires the seller to charge VAT unless an exemption applies. The option to tax allows the owner to charge VAT on the sale, making it beneficial for sellers who are VAT registered. This is particularly relevant if the seller has incurred VAT on costs and wants to recover that input VAT. Furthermore, if the building is less than three years old, it typically falls under the category where VAT is chargeable, as new properties are often exempt from zero-rating provisions that apply to older buildings. There are specific criteria and rules determining the VAT treatment based on the age of the property and whether the seller has opted to tax, which highlight the necessity of understanding these details in transaction planning and compliance. This understanding is crucial for businesses engaged in the acquisition or sale of commercial properties, as it impacts the cash flow and overall tax liability of the buyers and sellers involved.