New HMRC Option to Tax procedures

The default VAT treatment of the sale or lease of land and property is VAT exempt.  Businesses can Opt to Tax (OTT) land or commercial property, which converts the exempt supply to VAT standard rate.

New procedures have been introduced by HMRC from 1 February 2023. HMRC will no longer perform any checks on new applications, nor respond to requests about previous notifications made to them.  The only acknowledgement issued will be an automatic email back to the sender.  The subject line of the email to the HMRC Option to Tax team must therefore include the address of the property and the start date of the option.  This automatic acknowledgement will copy back only the subject line of the sent email.

The impact of these changes is threefold;

• New OTT notifications should always been sent to HMRC by email rather than by post
• Businesses must keep accurate records of which properties they have OTT
• Businesses who belatedly notify HMRC of a backdated OTT must retain supporting documents to demonstrate their earlier decision to OTT

For more information, please get in touch with our Indirect Tax team.