VAT and property – option to tax

HM Revenue & Customs (HMRC) has announced that, with effect from 1 February 2023, it will no longer issue VAT option to tax notification receipt letters.

However, if an option to tax a property is notified to HMRC by email, an automated email response will still be generated and sent out. Going forward, land owners should therefore consider notifying options to tax to HMRC by email only and keeping HMRC's automated response with their VAT records as evidence of the notification.

HMRC will also, from the same date, stop responding to requests confirming the existence of an option to tax on a particular property unless:

1. the option to tax effective date is likely to be more than six years ago; or
2. the person making the request has been appointed as an LPA receiver or as an insolvency practitioner to administer the property in question.

Generally, businesses are required to retain their VAT records (which includes options to tax) for six years. It is however strongly recommended that options to tax are kept for longer than that in the event, for example, of a property sale more than six years after the property was acquired.

Land owners who are either unsure of the VAT status of their properties or who have mislaid their VAT option to tax notification receipt letters should strongly consider applying to HMRC for confirmation of notification before 1 February 2023.

For further information, please contact Philip Mundy