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HMRC internal manual

VAT Land and Property

Option to tax: belated notification of an option to tax: belated notification applications from previously unregistered businesses

Occasionally, you may receive a belated notification request from a business that was not registered at the point it claimed to have made the decision to opt.

For example, an unregistered business may have purchased a building in June 2010, charged ‘VAT’ on rental invoices since then, then applied to register in January 2011, submitting a belated notification application with the VAT registration form.

You should examine these types of cases carefully and consider whether the business’s actions have been consistent with a person who has made an option to tax decision, particularly in cases where there has been a significant delay between the supposed date of the decision and the application to register. If the business wished to manifest an option to tax decision, ask why it did not apply to register and notify at an earlier stage and then consider whether its explanation is plausible.

If you do accept that a decision was made at the relevant time, you should also consider whether there will be any revenue risk to HMRC by allowing belated notification, and take steps, where appropriate, to address any revenue risk by liaising with the appropriate compliance colleagues. Some points to consider are:

  • whether the taxpayer was liable to register for VAT at an earlier date as a result of the option
  • whether penalties should be imposed for late registration
  • whether there is any ‘VAT’ the business has charged without a VAT registration number that should be recovered as a debt to the Crown
  • whether the taxpayer’s tenant has recovered any ‘VAT’ that was wrongly charged.

The latter two points should be investigated even if you refuse belated notification.