MHA | Option to Tax – HMRC changes will increase risk on property…

Option to Tax – HMRC changes will increase risk on property transactions

Glyn Edwards · April 21st 2023 · read

Houses down a street

HMRC have announced that they intend to go ahead with a reduced level of service when dealing with options to tax following a recent trial. This is despite negative feedback from professional bodies and property agents.

Changes to HMRC Option to Tax process

HMRC will stop issuing Option to Tax Notification receipt letters from 1 February 2023 with the only possible acknowledgement being an automated email response. A Notification sent by any other means will not receive an acknowledgement or receipt unless HMRC require further information about the option.

Furthermore, HMRC will stop processing requests confirming the existence of an Option to Tax, except under certain circumstances:

  1. The effective opted date is likely to be over 6 years ago, or
  2. After the appointment of a Land and Property Act Receiver, or an Insolvency Practitioner to administer the property in question.

If these conditions are met a request to confirm that an Option to Tax is in place on the relevant property must be accompanied by a letter or deed of appointment along with the following details:

  • Name of the Business/person who had opted to tax the property 
  • A VAT Registration Number (if applicable) 
  • The full address of the land/property in question, including postcode. 
  • The effective date of the option to tax if known.
  • The date you first charged VAT on the opted land/property. 
  • The date the property was acquired and/or a loan was taken out by the opter on the relevant property. 

Sollicitors, in particular, will have to get used to accepting more risk when dealing with property transactions, with the need for a greater acceptance that an OTT is in place without proof from HMRC.

The decision to refuse to send any acknowledgements to options sent by post is certain to be challenged as it discriminates against the digitally excluded.

Get in touch

If you would like to discuss how the Changes to HMRC Option to Tax process will impact you and your property plans, please get in touch.

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