## Establish the VAT treatment before modelling
HMRC's [Land and property notice](https://www.gov.uk/guidance/vat-on-land-and-property-notice-742) says supplies of land and buildings are generally exempt, subject to exceptions. A freehold sale of a new or partly completed commercial building is standard-rated unless it qualifies as a transfer of a going concern.
HMRC's [option-to-tax notice](https://www.gov.uk/guidance/opting-to-tax-land-and-buildings-notice-742a) says an option normally makes supplies of the opted interest standard-rated and normally permits recovery of VAT incurred in making those supplies. The notice also contains cases where an option is disapplied.
That means the model needs the transaction's documented treatment; it should not infer VAT from the words commercial property.
## Calculate the gross completion amount
The current standard VAT rate is 20%. For a controlled net price of GBP 500,000 where the transaction is confirmed as standard-rated:
**VAT = GBP 500,000 x 20% = GBP 100,000**
**Gross price = GBP 500,000 + GBP 100,000 = GBP 600,000**
These calculations do not establish that VAT applies. They calculate the cash effect after the treatment and rate have been confirmed.
## Price the VAT bridge separately
The [bridging loan cost calculator](/tools/bridging-loan-cost-calculator) calculates monthly interest multiplied by term, plus arrangement, exit, broker, valuation and legal fees.
For a controlled GBP 100,000 VAT facility at 1% monthly for four months, interest is GBP 4,000. A 2% arrangement fee is GBP 2,000. Those two inputs total GBP 6,000 before exit, broker, valuation, legal and contingency costs.
Keep the GBP 100,000 tax amount and GBP 6,000 controlled finance cost as separate lines. One is transaction tax cash; the other is the cost of the example facility.
## Keep recovery timing conditional
VAT Notice 742A says a person making an option should keep a written record identifying the land or building and the decision date. It says notification must normally be made to HMRC within 30 days of the decision.
The notification must state the land or buildings being opted and the date from which the option has effect. An option cannot take effect before the decision to opt.
The same notice says recovery normally follows taxable supplies, while exclusions and disapplication rules can affect the result. Do not offset a projected repayment against completion cash until the VAT adviser has confirmed eligibility, evidence and timing for the actual buyer and transaction.
The [due diligence checklist](/tools/due-diligence-checklist) keeps legal, finance and document evidence visible. Its controlled workflow pauses the deal while red evidence items remain.