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Option to tax - cooling-off period |
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Having opted to tax, a property owner may want to revoke that option if it
turns out to be more advantageous to keep the property exempt (even though
this means it will incur irrecoverable input tax). For example, by revoking the
option, L may be able to obtain a higher rental return from a T with an exempt
business (such as a bank). This will be benefi cial if the increased rent will
exceed the landlord’s irrecoverable VAT.
Under the old regime, an option to tax could be revoked within the first three
months after it had been made, but only with the consent of HMRC and only
if no supply of the land had taken place since the option was made (plus
there had been no transfer of the business as a going concern, and no input
tax had been reclaimed by virtue of the option). As from 1 June, the cooling-off
period is extended to six months, and although the requirement that no
grant in relation to the land has been made remains, the fact that input tax
is being reclaimed will no longer prevent revocation (the input tax reclaimed
will simply have to be repaid). Note that it will not be necessary to obtain
permission from HMRC to revoke the election, provided it is certified that all of the conditions allowing revocation have been met. But, it is necessary to
notify HMRC on a prescribed form. Source: DLA Piper .© Practical Lawyer
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July 2008 |
