Changes to Option To Tax (OTT) procedures

As of 1 February, HMRC has changed its procedure for notifying an option to tax (OTT) on properties.

The two stages to making a valid option remain the same:

  1. The decision to opt to tax is made
  2. HMRC are notified of the decision in writing within 30 days of the decision being made (usually by submission of form VAT1614A)

So what is changing about the option to tax procedure?

What is changing is how HMRC will confirm they have received notification of the OTT. In the past, when HMRC received the OTT election, they replied by letter confirming receipt. Letters would include details such as the business VAT number, business name, and address of the opted property, as well as the date the election was made.

From 1 February, HMRC will no longer issue acknowledgement letters. Instead, the notification of the election to the Option To Tax unit should be sent by email. An auto response will be issued by HMRC by email to confirm they have received the election.

Due to these changes, it is vital that the email sent to HMRC includes the following:

  • The address and postcode for the property
  • The date the election took effect

As the email reply will be the only proof the election was made, both the original email sent and the auto response email must be kept.

A copy of the VAT1614A will also be useful but this only proves the form was filled in, not that it was submitted to HMRC.

If the email does not contain the correct information it will not be bounced back and an auto response will still be issued.

What if these details are not included in the email subject line?

If the above information is not included, there may be issues when it comes time to sell an opted property. A buyer will need to see proof that an election was made to HMRC. An auto reply from HMRC that does not include these details likely won’t be accepted as evidence. This is because it won’t prove what property the election is on and the date of the election. Therefore, a buyer may not accept any VAT charge and there could be huge implications for the sale.

Normally, if there’s no evidence an OTT has been made a copy could be requested from HMRC, but this is also changing. Proof can now only be obtained for elections where the effective opted date was more than six years ago or if you’ve been appointed as a Land and Property Act receiver or an insolvency practitioner to administer the property in question.

If you need help with notifying HMRC of an OTT, we would be happy to assist you!

 

Please do get in touch to see how we can help by calling us on on 01243 782 423. Alternatively you can email us from our contact page and a member of our expert team will be in touch!

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