What is it?
Option to Tax is the ability to charge VAT on the sales of land and buildings (including rent).
Option to Tax is not automatic. If you wish to Opt to Tax land and buildings you will need to apply to HMRC. Without an Option to Tax it is likely that a sale of land and buildings will be exempt for VAT purposes (although there are several exceptions to this rule) and any associated input VAT will be irrecoverable or subject to partial exemption de-minimis rules.
When an Option to Tax is applied to land and buildings, output VAT will become due on future sales or supplies, and qualifying input VAT relating to the land and buildings can be recovered.
Before deciding whether to ‘Opt to Tax’ it is always recommended that you seek professional advice.
Who is it for?
Businesses who provide services relating to land and buildings (including rent), looking to recover input VAT on associated costs.
There are also other more complex reasons you may wish to Opt to Tax Land and Buildings, which would need to be considered on a case by case basis.
How does it work?
You have 30 days to notify HMRC of your decision to Opt to Tax. However, due to COVID-19 the timeframe to notify HMRC has temporarily been increased from 30 days to 90 days. This applies to decisions made between 15 February 2020 and 31 July 2021. The 90 day period starts from the date the decision was made. For example, if you made the decision to Opt to Tax a building on 31 July 2021, you will need to notify HMRC by 30 October 2021 at the latest.
For decisions made from 1 August 2021, you must notify HMRC within 30 days.
What should I do next?
To apply for permission to charge VAT on these services, you will need to download and complete a VAT 1614A form. Once completed you can either email or post it to HMRC:
Email: optiontotaxnationalunit@hmrc.gov.uk
Post: HM Revenue and Customs Option to Tax National Unit
123 St Vincent Street
GLASGOW
G2 5EA
Alternatively, get it touch with Critchleys and we will be able complete the form on your behalf.
If you have any queries regarding the above or have any other questions relating to your VAT returns. Please do not hesitate to contact Corina Hall.
First Published 16 March 2021
Last Updated 4 August 2021
4 August 2021
You have 30 days to notify HMRC of your decision to Opt to Tax. However, due to COVID-19 the timeframe to notify HMRC has temporarily been increased from 30 days to 90 days. This applies to decisions made between 15 February 2020 and 31 July 2021. The 90 day period starts from the date the decision was made. For example, if you made the decision to Opt to Tax a building on 31 July 2021, you will need to notify HMRC by 30 October 2021 at the latest.
For decisions made from 1 August 2021, you must notify HMRC within 30 days.
16 March 2021
First published
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