Reasons to choose Wilson Browne
If a person decides to exercise an option to tax on property for VAT purposes, they need to notify HM Revenue and Customs (HMRC). The law requires notification to HMRC of an option to tax within 30 days of it being exercised.
There is no set process for opting, however, it requires two stages – a decision to opt, followed by notification of HMRC. HMRC has provided a form for notifying the option, which also shows how to submit it – Opting to tax land and buildings: Notification of an option to tax (VAT1614A). From 1 February 2023, HMRC will no longer issue VAT option to tax (OTT) notification receipt letters. From 1 February 2023, when an option to tax is notified to HMRC by email, an automated email response will continue to be generated and sent, but no acknowledgement will be provided for OTTs notified by other means. Taxpayers may therefore consider only notifying an OTT to HMRC by email and keeping HMRC’s automated response with their VAT records as evidence of the notification (and of its date). Responsibility for ensuring that the option is valid and the notification is correct will remain with the opter.
HMRC will also cease from that date to respond to requests about the existence of an option to tax on a particular property unless either:
- The effective opted date is likely to be over six years ago.
- The person making the request has been appointed as a receiver under the Law of Property Act 1925 or as an insolvency practitioner to administer the property.
If a request is made as to the existence of an option to tax (in these limited circumstances), it will need to be accompanied by a letter or deed of appointment as a receiver or insolvency practitioner and include specified information.
Businesses are currently required to retain VAT records (including OTTs) for six years. It is generally good practice to retain OTTs beyond this timeframe (as evidence of the existence of an OTT will usually be required if a property is sold or leased, but taxpayers have also been able to ask HMRC to provide confirmation of the existence of an OTT. From 1 February 2023, HMRC will no longer do so (other than in the specified circumstances), therefore, taxpayers may wish to check their records and, where necessary, seek HMRC’s confirmation of notification before that date (particularly in relation to transactions which are between exchange and completion).