Changes to notifying an option to tax

The time limit for notifying an option to tax has returned to 30 days from 1 August 2021. However, the ability to sign these forms electronically has been made permanent.

Opting to tax is a two stage process. A landowner (or prospective landowner) will exercise the option to tax over land with effect from a current or future date. Secondly, to be effective, the option to tax needs to be notified to HMRC within 30 days.

What has changed?

As a result of the pandemic, HMRC extended this standard period to 90 days for decisions made between 15 February 2020 and 31 July 2021. For decisions to exercise the option to tax made from 1 August 2021, the normal time limit returns to 30 days, as set out in legislation.

Note that in some circumstances, such as when property is being acquired as a transfer of a going concern (TOGC) different time limits for notification of options to tax may apply.

A second change made was that HMRC accepted that these notifications could be signed electronically. This welcome change has been made permanent. In order for HMRC to accept an electronic signature, HMRC will require some proof that the electronic signature is from someone authorised to sign on behalf of the business; such as a director if it is a company. If the form is signed by someone else in the business, or by an agent, it will need to be accompanied by an authority from the authorised individual.

Details of office-holders that HMRC expects to be authorised signatories at various organisations, and the evidence HMRC expects to see if someone else is signing the form, can be found in HMRC's guidance.

Further information

Please get in touch with Adam Cutler or your usual VAT contact if you would like to discuss this further.