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HMRC internal manual

VAT Transfer of a going concern

Land and Property: Notification on or before relevant date: notification of the option to tax

Article 5 refers to notification of the option to tax “required by paragraph 3(6) of Schedule 10 to the Act”. If paragraph 3(6) of Schedule 10 requires notification (NB all elections made since 1 March 1995 require notification) that notification must be given to HMRC on or before the relevant date. However, if no notification was required under this paragraph (i.e. the option to tax was made before 1 March 1995 and the value of rents received was less than £20,000) then the condition in Article 5 will be met regardless of whether the option to tax was notified.

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. You should note that the relevant date is the time of supply. For VAT purposes the time of supply is normally the date of the transfer, but will also include receipt of a deposit that may otherwise create a tax point. A tax point is not created by the receipt of a deposit by a third party acting as an independent stakeholder (as opposed to an agent of the seller) until the money is released to the seller. Further information on tax points can be found in Notice 700 The VAT Guide and guidance V1-11 Time of Supply.

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