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HMRC internal manual

VAT Transfer of a going concern

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HM Revenue & Customs
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Land and Property: Notification - relevant date; option to tax

The option to tax by the purchaser must be notified to HMRC in writing no later than the relevant date and must apply from that time.

Where the written notification of the option is sent to HMRC by mail, the notification must be properly addressed, pre-paid and posted on or before the relevant date.

The transferee’s notification is that he will not use the property to make supplies that are exempt as a result of his option having been disapplied by paragraph 12 of Schedule 10. Article 5 does not specify what form the notification must take but it is in the seller’s best interest to ensure that the notification is unambiguous.

Notice 742A Opting to tax land and buildings fully explains the option to tax

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A seller who fails to obtain the notification and does not charge VAT will be liable to HMRC for output tax. Where the seller has received a notification and complied with all other TOGC requirements he is entitled to treat the sale as a TOGC. If it is subsequently found that the notification is incorrect, we should not seek to recover output tax from him unless he had been complicit in the incorrect notification.

Relevant date is defined under Article 5(3) of the VAT (Special Provisions) Order 1995 as:

“the date upon which the grant would have been treated as having been made or, if there is more that one such date, the earliest of them.”

Thus, the relevant date is the time of supply of the land. It will normally be the date of completion or the date the property is transferred, though this may not always be the case. The payment of a deposit prior to completion that creates a tax point could also form the relevant date. However, care should be taken to distinguish deposits paid to independent stakeholders, as such payments do not create tax points until they are released to the seller. It should be remembered that if the TOGC conditions are not met when a deposit is paid, then so does the rest of the consideration, even if the conditions are met when it is paid.

If the purchaser has not opted and notified HMRC of the option and notified the seller that his option is not disapplied prior to paying (by the relevant date) then the supply of the property is not de-supplied by the TOGC provisions. This is the case regardless of any later exercise of the option or notification. Where no deposit or part payment has been made, the relevant date is normally the date the property was transferred.

In relation to this paragraph the transferor (seller) and the transferee (purchaser) also include any relevant associate as defined in paragraph 3 of Schedule 10 VAT Act 1994. This condition is necessary to avoid the artificial movement of the asset between associated companies to get around the VAT grouping and TOGC rules.

Further information on tax points can be found in Notice 700 The VAT Guide and guidance VATTOS (Time of Supply)