Option to tax

HMRC stop issuing option to tax notification receipts

13 January 2023| CATEGORIES: Uncategorised| TAGS:

HMRC has advised that from 1 February 2023, it will no longer issue VAT option to tax (OTT) notification receipt letters, nor provide confirmation that an OTT is in place – outside specific circumstances.

OTT Notification by e-mail

When notifying HMRC of an OTT of land or property by e-mail, HMRC request that the subject line includes the following information:

  • property address, including postcode, and
  • effective date of the option to tax notification.

An automated e-mail response will be generated by HMRC which includes the date the notification was received by HMRC.  This e-mail should be kept in the VAT records as evidence of the OTT.

An OTT notification sent any other method will not get an acknowledgement or receipt. HMRC will, however, respond if more information regarding the OTT is required.

Confirming the existence of an OTT.
HMRC will also cease to respond to requests about the existence of an OTT on a particular property from 1 February 2023, unless either:

  • the effective opted date is likely to be over six years ago,
  • the person making the request has been appointed as a Land and Property Act receiver, or as an insolvency practitioner to administer the property concerned.

If a request is made as to the existence of an OTT (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 other specified information.

HMRC consider it to be the responsibility of the opter to acknowledge the validity of an OTT and retain evidence of its notification to HMRC.  Businesses are therefore advised to only notify HMRC by e-mail and retain the automated response as proof of the OTT.

Land and property transactions are typically high value and the consequences of getting the VAT treatment wrong can be significant.  It is therefore crucial that the VAT status of land or property where the option to tax has been exercised can be substantiated.

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