Revoking an option to tax

Produced by Tolley

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

  • Revoking an option to tax
  • Six-month cooling off period
  • Conditions
  • How to revoke an option to tax
  • Automatic revocation of an option where no interest has been held for more than six years
  • Revoking an option after twenty years
  • Condition 1 ― relevant interest condition
  • Condition 2 ― 20-year condition
  • Condition 3 ― capital item condition
  • Condition 4 ― valuation condition
  • More...

Revoking an option to tax

It is possible in certain circumstances for a business to effectively 'revoke' a valid option to tax. This guidance note provides an overview of the circumstances in which a business can revoke an option to tax and the procedure that must be followed.

Six-month cooling off period

It is possible for a business that has opted to revoke the option if it changes its mind within six months of making the election. .

Conditions

The business must satisfy the following conditions before it can revoke the option to tax:

  1. less than six months have elapsed since the day from which the option had effect

  2. no VAT has become chargeable on a supply of the land as a result of the option (ie the business has not made any supplies of the property that would be liable to VAT since opting to tax)

  3. the property has not been transferred as part of a transfer of a going concern since the business opted to tax (see the TOGC ― overview guidance note)

If the above conditions are satisfied, the business can request permission to revoke the option to tax from HMRC. The business will need to complete and submit a VAT1614C in order to request permission to revoke the option to tax. If the business also satisfies the conditions below it does not require permission from HMRC in order to revoke.

These are the additional conditions that need to be satisfied before a business will be entitled to revoke the option to tax without obtaining prior permission from HMRC. Please note that the business only needs to satisfy one of these additional conditions:

  1. if neither the business, nor a relevant associated business, has recovered additional input tax in respect of the property as a result of opting to tax

  2. if the business has recovered additional input tax as a result of the option to tax, the additional input tax will need to be repaid to HMRC via

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