Waiver of exemption - transitional VAT measures

A waiver of exemption from Value-Added Tax (VAT) applied to certain property lettings where:

• the lease was less than ten years
• and
• where the landlord waived his or her right to exemption from VAT in respect of the letting(s) prior to 1 July 2008.

From 23 December 2025 all waivers of exemption from VAT are automatically cancelled. The Capital Goods Scheme adjustment period for any properties covered by a waiver has also ended.

Any letting previously covered by a waiver of exemption will automatically become an exempt letting for VAT. A landlord can exercise a 'landlord's option to tax' on lettings on commercial properties. However, a 'landlord's option to tax' cannot be exercised in respect of residential properties.

Where a landlord does not exercise a 'landlord's option to tax' the lettings will:

• remain exempt from VAT
• and
• there will be no deductibility in respect of any future costs associated with the lease. 

Guidance on the option to tax lettings is covered by letting of immovable goods.

Further guidance contains more detailed information on the changes that apply to the waiver of exemption rules.