Rent to buy scheme

The rent to buy scheme is an attempt by property developers to attract potential purchasers to buy a house.

The developer structures the agreement, using an initial period of renting, with an option to purchase at the end of the letting period.

The agreement may include:

  • an initial option payment
  • periodic payments that include rent
  • a final payment for the purchase of the property.

There are many variations of this scheme. The exact Value-Added Tax (VAT) treatment of each scheme can only be established by the facts of each individual case.

Further guidance contains more detailed information on the VAT treatment of the rent to buy scheme and how to treat some of the variations of this scheme.