Temporary changes to notifying option to tax land

The option to tax allows a business to charge VAT on the sale or renting out of commercial property.

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The option to tax allows a business to charge VAT on the sale or renting out of commercial property. If exercised, the option makes a taxable supply from what would otherwise be a vat exempt supply. This is very relevant to parties wanting to sell or rent out commercial property.

It is thus vital for a property owner to take specialist advice before the sale or lease of the premises in question. It is a significant step because it allows the recovery of input tax that would otherwise not be possible without the option to tax being exercised. This can be a significant financial benefit.

HMRC must be notified of the option to tax being exercised within 30 days of the decision being made. 

The government has announced that this 30-day period will temporarily be extended to 90 days from the date the decision to opt was made. This timeframe applies to decisions made between 15 February and 31 May 2020.

Usually, HMRC must be notified by either:

  • printing and sending the notification to HMRC, signed by an authorised person within the business, or
  • emailing a scanned copy of the signed notification

There have been further relaxations in this regard, as follows:

If you are notifying an option as a business

You can submit the form with an electronic signature but we need evidence that the signature is from a person authorised to make the option on behalf of the business.

Examples of supplementary evidence include emailing the form:

  • with an email from the authorised signatory to the sender within the business, giving authority to use the electronic signature
  • from the authorised signatory with their sign off in the email and the form
  • with an email chain or a scan of correspondence showing the authority given by an authorised signatory

If you are notifying an option as an agent

If you are an agent notifying us that your customer has made a decision to opt and you email the form with an electronic signature, you need to send us proof that:

  • the signature is from a person authorised to make the option on behalf of the business
  • authority has been granted to you by the business to use the electronic signature

Examples include emailing the form:

  • with a current email or email chain from an authorised signatory of your customer's business, giving you authority to use this signature and send it to us on their behalf
  • with a scan of correspondence showing authority is granted by an authorised signatory to use their electronic signature on the form and to also send this form to us on their behalf

To discuss this or any other commercial property matter, contact us.

Members: Simon Shaw, Elizabeth Rimell and Janice Leyland.
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