Option to Tax: Commercial property

Option to Tax: Commercial property

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Hi 

A client has notified HMRC of its desire to opt to tax a building (belated notification). HMRC have agreed the date with the client of effective date of the option to tax becoming valid. The client wants to sell the building but has yet to receive a certificate confirming the effective date and only has letters stating what date the option would be valid from and the letter from the client accepting this. 

Can the client sell the building or do they have to wait for the actual cert from HMRC?

The buyer has said that they will not pay the VAT without the Cert but I believe that the client is obligated to charge VAT on the sale as they have notified HMRC of their intention to opt to tax and the effective date is the date the decision to opt was made. Is this correct?

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By spidersong
27th Oct 2014 14:26

OTT

If they've made and notified an option and the effective date is prior to the transfer of the property then yes they will need to account for the VAT on the VAT return that covers the transaction.

I must admit I'm wondering what you mean by 'certificate' though. The last option I did, and many moons ago when I processed them for HMRC (before centralisation north of the border), there were only acknowledgement letters issued confirming that they'd received the option and the effective date, and it seems like you already have these.

Indeed the HMRC notice on the matter (742A) says:

"4.2.4 Will I receive an acknowledgement of my notification?

We will normally acknowledge receipt of your notification within 15 working days, although this is not necessary for the option to tax to have legal effect. You should not delay charging VAT just because you have not received our acknowledgement."

The underlining's mine but the extract ably covers all points required.

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