Extended deadline to notify VAT option to tax

As part of its response to the Covid-19 pandemic, HMRC extended from the usual 30 days to 90 days the period in which a taxpayer is required to notify an option to tax over property to be made.

Initially this extension only applied to options made between 15 February 2020 and 31 May 2020.  However, on 23 June, HMRC updated its guidance and will now apply the extended 90-day time limit to all options made between 15 February and 31 October 2020.

When a taxpayer wants to opt to tax their commercial property for VAT (often referred to as ‘electing for VAT’) it means that most supplies that the taxpayer makes using that property (typically, rents it receives from tenants) are have VAT added to them.  This is usually done to enable the taxpayer to recover all the VAT it incurs in running the property (including, for example, VAT on rents it pays to a superior landlord; or reconstruction or refurbishments costs).

Opting to tax takes place in two stages: the first is a decision by the taxpayer that it wants to charge VAT in respect of the property; the second is notification of that decision to HMRC.  It is this second stage that HMRC has allowed to be 90 days after the decision is taken, rather than 30 days.

If you want further information on this change, or think it may affect your business, get in touch with Samuel Rippon or your usual Teacher Stern contact.

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