VAT options to tax - a key change to the option to tax process

Pieter Boodt, Partner in the Russell-Cooke Solicitors, real estate, planning and construction team.
Pieter Boodt
3 min Read

HMRC have announced that with effect from 1 February 2023, they will no longer issue a formal acknowledgement when they receive notification of an option to tax, nor will they respond to requests for confirmation of whether an option to tax has been made by a particular entity in respect of a particular property (except where the effective date of that option is likely to be over six years ago or the request is made by an LPA receiver or insolvency practitioner, to administer the property).

The option to tax allows businesses to charge VAT on the sale or rental of land or property. It then allows businesses to recover the VAT costs that arise in respect of that property.

It is therefore recommended that future notifications of options to tax are sent to HMRC by email (using the designated HMRC option to tax email address – [email protected]).

A notification submitted to this email address will trigger an automated response, as evidence of the date of notification. The automated response will be the only communication HMRC will send and it will not confirm HMRC’s acceptance of the effective date of the option to tax. 

When notifying an option to tax by email, care should be taken to ensure that the automated response includes sufficient information to identify the notification to which it relates.

HMRC recommend that the following information is included in the subject line of the email attaching the notification:

  1. Property address (including postcode);
  2. Effective date of the option to tax.

You may also wish to include the name of the notifying entity in the subject line and the automated response should be retained safely for at least six years (but preferably longer), as evidence of notification.

It is not clear if HMRC will still process a request for confirmation of a historic notification of an option to tax (if they receive that request before 1 February 2023), but property owners with incomplete option to tax records should consider submitting a request to HMRC prior to 1 February 2023, particularly if they believe that the effective date of a particular option is after 31 January 2017.

Going forward, property owners that do not hold HMRC acknowledgement or confirmation of notification of their options to tax should expect to be asked for further evidence of the circumstances of their notifications and warranties from their tenants/purchasers as to the VAT status of their properties, before those tenants/purchasers accept that VAT should be charged on the supplies being made to them.

Our real estate solicitors are well placed to advise across a range of issues, including option to tax processes.

If you have any questions on the implications of the changes to the option to tax process, please contact us (Holborn: 020 3826 7523, Putney: 020 3826 7518), alternatively, please complete our online enquiry form.

Briefings Real Estate HMRC will no longer issue a formal acknowledgement when they receive notification of an option to tax changes to tax changes to option to tax process VAT HMRC