Option to tax ― when can an option be revoked?

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Option to tax ― when can an option be revoked?
  • Introduction to the revocation of the option to tax
  • Revoking the option to tax in a six month cooling off period
  • Conditions for revocation in cooling off period
  • Notification of revocation in cooling off period
  • Revoking the option where no interest has been held in the property for six years
  • Revoking the option after 20 years
  • Condition 1 ― relevant interest condition
  • Condition 2 ― 20 year condition
  • Condition 3 ― capital item condition
  • More...

Option to tax ― when can an option be revoked?

This guidance note looks at the circumstances under which an option to tax may be revoked.

For an overview of the option to tax more broadly, see the Option to tax ― overview guidance note.

In-depth commentary on the legislation concerning the revocation of the option to tax is found in De Voil Indirect Tax Service V4.115D.

Introduction to the revocation of the option to tax

The option to tax is normally a long-term decision and therefore not one to be taken lightly. The advantages and disadvantages should be weighed up carefully since once the option has been taken, the circumstances in which it can be revoked are narrow. These advantages and disadvantages are explored in the Option to tax ― deciding whether to opt guidance note.

Broadly, the situations in which the option to tax can be revoked can be divided into the following categories (the conditions of which are explored further in this guidance note):

  1. revocation in a six-month cooling off period

  2. revocation where no interest has been held in the property for six years

  3. revocation after 20 years

Note that as well as there being a possibility of revoking the option to tax in the circumstances above, there are also circumstances where the option to tax is not effective / is disapplied. These circumstances are covered separately in the Option to tax ― what is covered by an option? guidance note.

Revoking the option to tax in a six month cooling off period

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