HMRC have recently changed their policy on acknowledging Option to Tax notifications.
Historically they have checked all notifications received, and would acknowledge that they had been received. In some cases, they would pick up errors and notify the taxpayer. This could be useful if a taxpayer did not recall whether they had opted to tax or not. By notifying again, HMRC would tell them that they had already notified and supply details of the original effective date.
With effect from 1st February 2023
In 2022, HMRC trialled a lighter touch acknowledgement process and undertook a brief public consultation. Rather than checking notifications, they have simply been sending a delivery receipt when notifications are sent by email, and no checks are being done into whether the notification is correct or signed by the appropriate person. With effect from 1 February 2023, this trial is permanent and they will also no longer respond routinely to requests to check whether an option to tax has been notified previously.
Citing the fact that it is the taxpayer’s responsibility to maintain their VAT records for six years, they will not check to see whether an option to tax was notified in the last six years. If it was probably notified more than six years ago, they will still check given the correct information. They will also check in the case of an insolvency practitioner or property receiver being appointed.
Send a separate email for each property being notified
Notifications by post will no longer receive any kind of acknowledgement, whereas an email submission will at least receive a delivery receipt. In order to be able to provide evidence that an option to tax has been submitted, ahead of a transaction, it is best practice therefore going forward to submit by email and send a separate email for each property being notified. The subject line of the email should include the property address, post code and effective date of the option, so that these are shown on the delivery receipt. It may also be beneficial to request a read receipt for the email.
For an option to tax notified at the time of a VAT registration application, these will not receive any acknowledgement if attached to the application. Whilst HMRC usually request that notifications are not made twice, it appears sensible to separately email the notifications as well as attaching to the registration application so that a delivery receipt is produced. If this is done before the registration number is issued, then the application reference can be used to enable the records to be updated.
For many years, requests have been made to HMRC that a business’ option to tax record is shown along with its registration certificate on its online HMRC VAT account. Until they are able to provide that facility, email notifications appear to be the way to retain any record of a notification being submitted.