Commentary

V4.115D Land subject to an option to tax—revocation of the option

Part V4 Exemption, zero-rating and reduced rates

V4.115D Land subject to an option to tax—revocation of the option

V4.115D Land subject to an option to tax—revocation of the option

The six-month 'cooling-off' period1

An option exercised by any person ('the taxpayer') may be revoked with effect from the date on which it was exercised, subject to the following conditions:

  1.  

    (a)     the revocation takes place within six months of the date the option had effect

  2.  

    (b)     no tax has become chargeable as a result of the option

  3.  

    (c)     no grant in relation to the land has been made which would be treated as the transfer of a going concern (and consequently a supply of neither goods nor services)

  4.  

    (d)     notice of the revocation is given to HMRC on form VAT1614C

In addition, one of the three following conditions must be met2:

  1.  

    (i)     neither the person who exercised the option to tax ('the opter') nor any relevant associate of the opter has recovered 'extra property input tax'3

  2.  

    (ii)     by virtue of the revocation, the opter and all relevant associates of the opter would be liable to account to HMRC under reg 107 or 108 of the Value Added Tax Regulations 1995 (SI 1995/2518)4 for all of the extra property input tax they have recovered, or

  3.  

    (iii)     extra property input tax has been recovered entirely on one capital item5 and amounts to less than 20% of the total input tax incurred on that item

HMRC may specify, in a notice, conditions which must be met for the revocation to be effective. They may also specify that revocation is only effective if their

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