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HMRC internal manual

VAT Land and Property

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HM Revenue & Customs
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Option to tax: belated notification of an option to tax: case law regarding belated notification

The case of Paradise Properties Ltd. LON/02/1073, showed that it is not appropriate to refuse belated notification simply on the grounds that the taxpayer has failed to consistently account for output tax (see VATLP22430). You need to consider the facts of each case. If output tax has not been consistently accounted for, you need to consider whether there is a plausible explanation for this.

HMCE (now HMRC) had refused to accept belated notification from Paradise Properties on the grounds that the Appellant had not consistently accounted for output tax from the ‘effective date’ of the option (the Appellant initially charged VAT, then failed to do so for a period). The tribunal allowed Paradise Properties’ appeal, because the company had provided a plausible explanation for the failure to account for output tax: The company’s accountant, who usually dealt with VAT matters had died during the relevant period, after the decision to opt was made. The staff that took over responsibilities for VAT matters were under pressure and had neglected to charge VAT.