Supplies of land and buildings are normally exempt from VAT. This means that no VAT is chargeable, but the person making the supply cannot normally recover any of the VAT incurred on their own expenses. However, it is possible to opt to charge VAT on land. HMRC has been trialling a new process for notifying an option.

When a taxpayer notifies an option to tax (OTT) under the new process, HMRC will only issue a receipt confirming that the notification of the OTT has been received.

Previously, when a taxpayer submitted a notification of an OTT, HMRC would carry out checks of the notification before sending back an acknowledgement. HMRC will no longer carry out these checks on the validity of the notification.

It has always been the responsibility of the taxpayer to confirm the validity of its OTT notifications. That remains the case. The change in process removes the blurred line where, previously, taxpayers may have believed HMRC’s acceptance of the OTT confirmed that it was valid. HMRC will take corrective action should it later transpire that the OTT is invalid.

The main driver for the change in process is the reduction in HMRC resources required to handle OTT notifications. HMRC states that this new process has allowed the OTT department to catch up on its backlog of several months. The new process will allow HMRC to continue replying to OTT notifications within 30 working days.

Historic notifications

HMRC has previously carried out extensive checks of its systems to find details of historic OTT notifications. Going forward, if HMRC is unable to locate a valid notification of an OTT on the property in question, it will request further information from the opter or an authorised representative.

HMRC will continue to review its processes in respect of current and historic OTTs to ensure continued improvement to its operations.

Changes to OTT forms

In addition to the changes to the process of notifying an OTT, HMRC has also removed the ‘print and post’ versions of the following forms:

• VAT1614B: Stop being a relevant associate to an option to tax
• VAT1614E: Notification of a real estate election

These can now only be completed online. Please note the online form can still be posted but it must be completed in full before it can be printed. The form can also be emailed to optiontotaxnationalunit@hmrc.gov.uk.

HMRC’s accessibility statement for its online forms can be found here: Accessibility statement for HMRC interactive forms