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HMRC internal manual

VAT Land and Property

Option to tax: decision and notification: introduction: the two stages of opting to tax: decision and notification

The process of making an ordinary option to tax is a two stage process. The first stage is making the decision to opt (or ‘exercising the option’), the second is notifying that decision in writing to HMRC to give it legal effect. Both stages are necessary for there to be a legally valid option to tax, except, with effect from 1 June 2008, in cases where:


The law does not prescribe how the decision to opt (the first stage) should be made. In Marlow Gardener and Cooke Ltd & Anor the tribunal described the decision to opt to tax as ‘the exercise of a right to choose’ which is ‘a unilateral act by the person in question and may be made by any method, formal or informal’ (paragraph 5 of tribunal decision VTD 19326). The High Court elaborated on this in paragraph 17 of its decision ([2006] STC 2014) saying what is required is ‘a sufficiently clear indication of intention which is sufficiently manifested or (so far as required) communicated’.

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Notification (the second stage) must be in writing (paragraph 34(1), Schedule 10) and must normally be given to HMRC within 30 days of the decision to opt (paragraph 20(2)(a), Schedule 10). However, HMRC has the discretion to accept belated notification (paragraph 20(2)(b), Schedule 10) - see VATLP22400 for guidance on when to exercise this discretion.

Paragraph 20 (3) of Schedule 10 gives HMRC the discretion to specify by tertiary law that an option to tax notification must be made in a particular form. HMRC has not exercised this discretion. Although we have provided a form for notifying options to tax (VAT 1614A) it is not compulsory for taxpayers to use this. A notification by letter will be equally valid.

It should be noted that VAT 1614A is the only form in the VAT 1614 series that does not have the force of law. Forms VAT1614B-J all have the force of law (see Notice 742A for details).