News & Articles


Option to tax: important changes

by Ian Marrow

When a commercial property is being sold it is often a point that the seller does not hold confirmation from HMRC of their option to tax on the property.

Those having to deal with HMRC in looking to get an acknowledgment of a notification of an option to tax, or confirmation that an option to tax has been notified in the past, know that the timescales in getting a response can be significant.

This means, especially if the sale has the ability of being treated as a Transfer of a Going Concern (TOGC), it is difficult, if not impossible, to get confirmation from HMRC in time.

Late last year HMRC had a consultation with a very narrow window for responses. In this consultation HMRC proposed that to speed up their dealing with option to tax notifications they would no longer issues letters to acknowledge receipt of a postal notification. This means that unless the option to tax is sent by email (which generates an automatic response from HMRC) there will be no evidence, from HMRC, that they received the submission.

The second proposal was that HMRC would no longer respond to written requests for confirmation that there is an option to tax on a property. This is the issue where there has, over the last few years HMRC’s response time has become significantly delayed; with some responses taking over a year. Even then the response can be unhelpful referring to a period before 1995 when certain supplies of commercial property did not require notification to HMRC.

However, HMRC has said that it will respond if it is “likely” that the option was notified more than six years ago (which means that if it could be before 1995 the response may be less than helpful once it arrives).

In January 2023 HMRC announced that these proposals would become Departmental policy from 1 February 2023.

Therefore, we would strongly recommend that option to tax notifications are made by email and the automated response along with copies of the original submission forms are kept as permanent documents by the business.

Anyone without an acknowledgement letter of their notification of their option to tax may wish to make a written enquiry now before HMRC decides that they will no longer respond to such requests.

Without an acknowledgement from HMRC it can be very difficult to confirm the correct tax treatment for a new tenant, or when selling the property either as a taxable disposal or a Transfer of a Going Concern.

This new policy means that it will soon become reality that there will be cases where the seller is unsure if they posted an OTT notification to HMRC and HMRC refusing to confirm if they received it.

If you would like to discuss theses important changes and your individual circumstances, please get in touch.

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