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Can option to tax be backdated?

Vat reclaim on commercial property refurbishment

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VAT registered business has recently purchased a commercial property ( no VAT charged) the company has subsequently refurbished the property and attempted to reclaim VAT on the expenditure. They have owned property for six months

HMRC have opened enquiry and holding onto VAT refund

Company owns two other properties both of which have been opted to tax. It’s only income is currently rental income received from these properties and the new property will be let once refurbishment complete.

The company forgot to opt to tax new property so obviously HMRC will not pay refund until option is made.

What is best option here:

a) Attempt to say that the company made the decision to opt to tax the property on purchase date on the basis that is what they have done in the past and the VAT reclaim would be made although no written evidence is available here.

B) admit that no option to tax was made and do this straight away. I assume VAT could then be reclaimed on following VAT quarter? Does it matter VAT was incurred prior to option made? 

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15th May 2019 08:21

AFAIK option to tax (the decision) can't be backdated.
BUT notification of the decision to HMRC can, in some circumstances.
See 4.2.1 of notice 742A for what's required:-
https://www.gov.uk/guidance/opting-to-tax-land-and-buildings-notice-742a...
Perhaps, depending on the facts, your clients have actually made the decision but 'less formally' in which case they wouldn't have "forgot to opt to tax new property" but "forgot to notify HMRC"?

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15th May 2019 09:38

There's no need to make a belated notification. Provided that no supplies have been made yet, you can opt from today's date. Once that is in place, HMRC should refund the VAT already claimed on previous return(s).

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