IMPORTANCE OF OPTION TO TAX RECORD KEEPING – HMRC TO STOP SENDING NOTIFICATION RECIEPT LETTERS

By Nicola May

Solicitor

HMRC has published a new brief setting out the option to tax notification process. From 1^st February 2023, when an option to tax is notified to the HMRC by e-mail, an automated response will be generated and sent, but no acknowledgement or option to tax document will be provided. Taxpayers should therefore consider an option to tax to the HMRC by e-mail and should be sure to keep the HMRC’s automated response which will constitute as evidence of the date of the notification and should file with their VAT records as evidence that a property is opted to tax. Options notified to HMRC before this date will get the standard option to tax notification receipt.

The HMRC is also to stop processing requests for confirmation of existing options to tax, except where the effective date of the option is ‘likely to be over six years ago’, or the request is made as part of insolvency proceedings. Accordingly, the brief emphasises the importance of retaining option to tax records for at least six years. Business’ are currently required to retain VAT records including option to tax documents for six years in any event, it would be good practice to retain the option to tax beyond this timeframe as evidence of the option to tax will be required if the property were to be sold.

Responsibility for ensuring that the option is valid and the notification is correct will remain with the opter. Taxpayers may wish to check their records and where necessary, seek HMRC’s confirmation of notification before the 1^st February 2023, particularly in relation to transactions which are between exchange and completion.