How to notify HMRC of an option to tax

An option to tax only takes effect if you notify HMRC in writing within 30 days of deciding to opt, under paragraph 20 of Schedule 10 to the VAT Act 1994. Most owners email form VAT1614A to HMRC’s Option to Tax National Unit and keep the automated reply as proof. If you have made exempt supplies of the property in the previous 10 years and do not meet an automatic permission condition, you must apply for permission on form VAT1614H instead.

What are the two stages of opting to tax?

VAT Notice 742A (section 4) describes two steps. First you decide to opt. That can happen at a board meeting or less formally, but you should keep a written record showing exactly which property you are opting and the date of the decision. HMRC’s VAT property manual (VATLP22360) quotes the High Court in Marlow Gardener and Cooke: what is needed is a sufficiently clear indication of intention. Second, you notify HMRC of that decision in writing. Both steps are needed for a valid option, except where prior permission is required or the option comes from a real estate election.

The option has effect from the date of your decision or any later date you choose. It can never have effect from a date before you decided (paragraph 4.3). For what opting does to rents, sale prices and VAT recovery, see our guide to the option to tax.

What is the deadline, and what if you miss it?

Paragraph 20(2) of Schedule 10 says notification is in time only if it is given before the end of 30 days beginning with the day you exercised the option, or within any longer period HMRC allows in a particular case. Because the 30 days begin with the day of the decision, that day counts as day one.

If you are late, send the notification with an explanation and evidence that you really decided at the time. Notice 742A (paragraph 4.2.1) says HMRC will normally accept a belated notification if you provide either:

• direct documentary evidence of the decision at the time, such as letters to third parties referring to the option; or
• evidence that VAT has been charged and accounted for and input tax claimed in line with the option, plus a written declaration from a responsible person, such as a director, that the decision was made at the relevant time.

VATLP22430 tells officers to refuse where the evidence is contradictory, for example if the VAT treatment of the rents was queried in the past without any mention of an option, or where accepting would give an unfair advantage from a tax avoidance scheme.

What must the notification contain?

Form VAT1614A is optional. VATLP22360 confirms a letter is equally valid and that VAT1614A is the only form in the VAT1614 series without the force of law. Either way, Notice 742A (paragraph 4.2.2) says the notification must state clearly which property is being opted and the date the option takes effect. In practice include:

• the full postal address and postcode of each building, or a map or plan where you are opting an area without an address;
• your VAT registration number, or your registration reference if registration is pending;
• if you previously made exempt supplies of the property, which automatic permission condition you meet;
• a signature from an authorised person.

Who can sign depends on the legal entity: usually the sole proprietor, a partner or trustee, a director or an authorised administrator (paragraph 7.1). An adviser can notify for you, but HMRC needs written confirmation that the adviser is authorised. If you send a form with an electronic signature, include evidence such as an email from the authorised signatory giving authority to use it (paragraph 7.7). If the signatory has no authority, the option may be invalid. Joint owners should notify a single option together and register for VAT together as if they were a partnership (paragraph 7.3).

Where do you send it, and what reply will you get?

If you are VAT registered, email the notification to optiontotaxnationalunit@hmrc.gov.uk. HMRC recommends a subject line giving the property address with postcode and the effective date of the option. You will get an automated reply showing the date HMRC received it. Keep that email, because since 1 February 2023 HMRC has not issued receipt or acknowledgement letters (Revenue and Customs Brief 1 (2023)). Notifications sent by post get no reply unless HMRC needs more information. The option has legal effect whether or not HMRC acknowledges it, so you should start charging VAT from the effective date.

If you are not yet registered, send the notification with your VAT registration application (Notice 742A, paragraph 6.1). See the VAT registration threshold for when registration is compulsory. HMRC’s option to tax helpline is 0300 200 3700.

When do you need HMRC’s permission first?

Under paragraph 28 of Schedule 10 you need prior permission if you have made, make or intend to make an exempt supply of the property at any time in the 10 years ending with the day the option is to take effect. HMRC must refuse permission unless it is satisfied there would be a fair and reasonable attribution of input tax.

You do not need written permission if you meet one of the four automatic permission conditions in section D of Notice 742A, which have the force of law. In outline:

1. It is a mixed use development and the only exempt supplies were of the dwellings.
2. You will not recover any VAT incurred on the property before the option, the exempt income was only regular rents or service charges, and after opting you expect to recover VAT only on overheads such as rent, service charges, repairs and maintenance, not refurbishment.
3. A detailed test about supplies to connected persons, continuing exempt occupation and capital spending, with a flow diagram at Annex 2 of the notice.
4. The exempt supplies were incidental to the main use, such as an advertising hoarding, a radio mast or an electricity substation. Letting space to an occupying tenant is never incidental.

If you meet a condition, you still notify the option, stating which condition applies. If you do not, apply on form VAT1614H. Once permission is granted the option takes effect from your application date, or a later date you asked for, without a separate notification, so keep proof of when you applied (paragraph 5.7). Notifying without permission when it was needed makes the option invalid, although HMRC can treat it as valid where tax would otherwise be at risk or a minor oversight was made despite reasonable checks (paragraph 5.9).

How do you find out whether a building is already opted?

An option binds only the person who made it, and members of their VAT group in some cases. Notice 742A (paragraph 4.4) says it does not pass to a buyer, who decides whether to opt for themselves. A tenant who sublets has the same choice. So the question is usually whether the current owner has opted, because that decides whether VAT is charged on the rent or the price.

Ask the owner for a copy of the decision record, the notification and HMRC’s automated reply or older acknowledgement letter, and check whether VAT appears on rent invoices. HMRC will not routinely confirm options to third parties. Under Revenue and Customs Brief 1 (2023) it will only say whether it holds a record if the effective date is likely to be over six years ago, or if you are a receiver or insolvency practitioner appointed over the property and send your letter or deed of appointment. You must give the opter’s name, VAT number, the full address, the effective date if known, the date VAT was first charged and the date the property was acquired or financed. VATLP22450 tells officers that having no record does not necessarily mean no option was made.

Owners must keep option records for at least six years and should keep them longer, because an option normally cannot be revoked until 20 years have passed (paragraph 6.2).

How does notification timing affect buying an opted building as a going concern?

If you buy an opted building as part of a transfer of a going concern, you must have opted and notified HMRC on or before the relevant date, and told the seller your option will not be disapplied under the anti avoidance rule in paragraph 12 of Schedule 10 (Notice 742A, paragraph 11.2). The relevant date is normally the transfer date, but it is earlier if a deposit is paid to anyone other than an independent stakeholder. Where permission is needed, it must have been granted by that date. Missing this turns a VAT free transfer into a standard rated sale. Our guide to VAT on commercial property explains how the exemption and the option fit together.

One last trap: if, when you opt, you already intend to revoke the option within the six month cooling off period, Notice 742A (paragraph 4.5) treats it as invalid from the start.

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Related Accountapedia entries

• Can you revoke an option to tax
• TOGC rules for selling a let commercial property
• Option to tax anti avoidance for connected occupiers
• Option to tax when converting to residential use
• Voluntary VAT registration
• The 90 day deadline after notifying a disclosure
• Penalty for not telling HMRC an assessment is too low

Sources

• legislation.gov.uk: Act 1994 c. 23, schedule 10
• GOV.UK: Opting to tax land and buildings notice 742a
• GOV.UK: Manual page VATLP22360
• GOV.UK: Manual page VATLP22430
• GOV.UK: Changes in processing option to tax forms
• GOV.UK: Vat option to tax
• legislation.gov.uk: Act 1994 c. 23, schedule 10
• GOV.UK: Vat application for permission to opt
• GOV.UK: Vat notification of an option to tax land andor buildings
• GOV.UK: Manual page VATLP22450

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.