1 February 2023

Option to tax: HMRC to stop sending notification receipt letters or option confirmations

From 1 February 2023, HMRC will no longer issue VAT option to tax notification receipt letters, nor confirm that an option to tax is in place (outside specific circumstances).

From 1 February 2023, HMRC will no longer issue VAT option to tax (OTT) notification receipt letters. This follows a closed consultation by the OTT National Unit, which ended on 28 November 2022.

From 1 February 2023, when an option to tax is notified to HMRC by email, an automated email response will continue to be generated and sent, but no acknowledgment will be provided for OTTs notified by other means. Taxpayers may therefore consider only notifying an OTT to HMRC by email and keeping HMRC's automated response with their VAT records as evidence of the notification (and of its date). Responsibility for ensuring that the option is valid and the notification is correct will remain with the opter.

HMRC will also cease from that date to respond to requests about the existence of an option to tax on a particular property unless either:

• The effective opted date is likely to be over six years ago.
• The person making the request has been appointed as a receiver under the Law of Property Act 1925 or as an insolvency practitioner to administer the property.

If a request is made as to the existence of an option to tax (in these limited circumstances), it will need to be accompanied by a letter or deed of appointment as a receiver or insolvency practitioner and include specified information.

Businesses are currently required to retain VAT records (including OTTs) for six years. It is generally good practice to retain OTTs beyond this timeframe (as evidence of the existence of an OTT will usually be required if a property is sold (for example, by CPSE 28.3), but taxpayers have also been able to ask HMRC to confirm the existence of an OTT. From 1 February 2023, HMRC will no longer do so (other than in the specified circumstances), therefore, taxpayers may wish to check their records and, where necessary, seek HMRC's confirmation of notification before that date (particularly with transactions which are between exchange and completion).