VAT – Option to Tax
HMRC have issued an updated copy of Notice 742A ‘ Opting to tax land and buildings’. The updated notice replaces the June 2008 edition and also incorporates a number of VAT Information Sheets (06/09, 14/09, 02/10 and 08/10) which had been published since the last version of Notice 742A. The information sheets have now been withdrawn.
The main changes to the notice are:
- allowing 30 days in which to notify an exclusion of a new building from the effect of an option (see paragraph 2.7.4)
- changes to when a body corporate ceases to be a relevant associate (see paragraph 6.3.3, third bullet point)
- anti-avoidance provisions to prevent automatic revocation of an option to tax when taking out a real estate election (see paragraph 14.8.2) or when a lapse of six years occurs since a relevant interest has been held in the opted property (see paragraph 8.2.2)
- changes to the conditions for revoking an option to tax within the six month ‘cooling off’ period (see paragraph 8.1)
- changes to the conditions for revoking an option to tax where more than 20 years have elapsed (see Box G at paragraph 8.3.3)
- changes to the time an option is revoked where prior permission is given by HMRC (see paragraph 8.3.9)
- an amendment to ‘the connected persons’ test (see paragraph 13.7)
- an updated definition of occupation for the purpose of the anti avoidance measures (see paragraph 13.8) and a new 10% occupation rule’ (see paragraph 13.8.4)
- updated guidance on real estate elections (see section 14)
- defining when acquisition of a property takes place for the purpose of a real estate election (see paragraph 14.5).