VAT – Option to tax case
A recent VAT tribunal case considered whether an option to tax was made on a property.
The issue concerned a taxpayer’s assertion that a genuine decision to opt to tax a property had been made but that the second step of notifying HMRC of the option to tax had not been made. The taxpayer subsequently tried to rectify this error by making a belated notification to HMRC. HMRC contended that the taxpayer had not in fact made any decision to opt to tax and therefore the belated option to tax was invalid.
The Tribunal had to consider whether the taxpayer had made a genuine decision to opt to tax. Whilst the Tribunal had the utmost sympathy for the taxpayer the appeal was nonetheless dismissed on the basis that the taxpayer in this case could not have made a decision to opt to tax as he was unaware this needed to be done.
The case highlights the importance in ensuring that businesses are aware of all their obligations in relation to opting to tax as the absence of doing so can result in an increased VAT cost.