VAT on Commercial Property Auction Purchases Explained

​When Is VAT Charged on Auctioned Commercial Property?

Not all commercial property sales attract VAT. Typically, the sale or lease of commercial property is VAT-exempt.

However, VAT on commercial property auction purchases becomes relevant in two key scenarios:

  • The property is less than three years old (new build)
  • The seller has made an election to “opt to tax”

In both cases, VAT is chargeable at the standard rate, and buyers must factor this into their bidding strategy.

Why Sellers Opt to Tax

Opting to tax allows sellers to convert an exempt supply into a taxable one.

This means they can reclaim VAT on associated costs like refurbishment, legal fees, and auctioneer commissions.

However, this decision directly impacts the buyer, who will now face VAT on commercial property auction purchases unless they too are VAT-registered and able to reclaim it.

Mixed-Use Properties and VAT Apportionment

When a property includes both commercial and residential elements—such as a shop with flats above—VAT applies only to the commercial portion.

Buyers must ensure the purchase invoice clearly separates the VAT-rated commercial element from the exempt residential units.

This is especially important when calculating VAT on commercial property auction purchases.

​Auctioneer’s Premium and VAT

Regardless of the seller’s VAT status, the buyer’s premium charged by the auctioneer is always subject to VAT.

This adds another layer to the total cost of VAT on commercial property auction purchases, and should be included in your financial planning.

Timing Your Opt to Tax Election

Buyers can elect to opt to tax at any time—even after purchase.

If you intend to rent out the property or incur significant refurbishment costs, opting to tax may allow you to reclaim VAT.

However, if your auction bid is unsuccessful, the election can be cancelled within six months or will lapse automatically after six years.

​How Trueman Brown Can Help with VAT on Commercial Property Auction Purchases

Navigating the complexities of VAT on commercial property auction purchases requires expert guidance.

At Trueman Brown Chartered Accountants, we offer tailored support to help you make informed decisions and stay compliant:

  • 📊 VAT Recovery Strategy: We assess your eligibility and help you structure purchases to maximise VAT recovery.
  • 🧾 Auction Preparation: We review auction listings and advise on VAT implications before bidding.
  • 📅 HMRC Compliance: We handle all necessary filings and elections, ensuring your tax affairs are watertight.

📧 Reach out to us at or call 📞 01708 397262 to discuss your next auction purchase.

FAQs: VAT on Commercial Property Auction Purchases

Q1: Is VAT always charged on commercial property bought at auction?

Not always. VAT applies if the property is new (under three years old) or if the seller has opted to tax.

Q2: Can I reclaim VAT on my auction purchase?

Yes, if you’re VAT-registered and the property is used for taxable business activities.

Q3: What happens if I opt to tax but don’t win the auction?

You can cancel the election within six months or let it lapse after six years.

Q4: Does VAT apply to the auctioneer’s fee?

Yes, the buyer’s premium is always subject to VAT, regardless of the property’s VAT status.

Q5: Can Trueman Brown help with VAT elections and compliance?

Absolutely. We provide end-to-end support for VAT planning, elections, and HMRC submissions.

 

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