The New Year brings new VAT developments
By Susan Cattell, Head of Tax Technical Policy
13 January 2023
Susan Cattell outlines recent VAT developments, including: HMRC tips on VAT registrations by agents, changes to HMRC’s Option to Tax processes, and the publication of HMRC guidance on the new VAT penalty regime.
VAT Registration – tips from HMRC
ICAS has been raising Members’ problems with the new VAT Registration Service (VRS) since it was launched last year. There have been several meetings and HMRC has already made some improvements, with more in the pipeline.
HMRC has now provided information on the main reasons why agent applications need to be passed to a caseworker (delaying registration) – and provided five tips on how to maximise the chances of obtaining an automatic decision:
1. Business verification failed/not completed
- Tip: Ensure that all business details are to hand when completing the application, including the client’s SA/CT details.
2. Same address used for business and either the applicant’s home address or agent’s address
- Tip: Ensure the correct addresses are entered at the correct part of the form. If the client genuinely works from home that’s fine, but if they have a separate business address, declare it.
3. Bank details provided for VAT repayments don’t appear to relate to the business
- Tip: Bank details for VAT repayments must be a UK account, in the name of the business, one of the partners, or the sole trader. If the name doesn’t match, details can be provided after registration, once fixed with the bank.
4. ID evidence required. Applicant has chosen to provide by post rather than attach
- Tip: Use the digital attachments option whenever possible. Whilst this won’t remove the need for a caseworker to look at the application, it makes it quicker and easier for them to make their decision.
5. Applicant’s details need further validation
- Tip: As with the business verification, make sure the required information is available. Use the “What you’ll need” list on gov.uk to ensure you have everything.
HMRC has been answering questions about VRS on the online Agent Forum. The forum is a place for agents to post queries and report widespread issues related to HMRC systems and processes. ICAS Members can register to access the forum, following the instructions provided. If you encounter any difficulties, email tax@icas.com.
Changes to HMRC’s Option to Tax processes
ICAS responded to a recent consultation on potential changes to the processing of Option to Tax (OTT) forms.
HMRC has subsequently announced that it will implement the proposed changes from 1 February 2023. It is important that anyone submitting OTTs takes account of the new approach and retains appropriate records.
Details of the changes are set out in Revenue and Customs Brief 1/23 and are as follows:
OTT Notification
HMRC will stop issuing Option to Tax Notification Receipt letters from 1 February 2023. HMRC notes that the correct and valid notification of an OTT remains the responsibility of the opter.
Option to tax notifications should be sent by email to: optiontotaxnationalunit@hmrc.gov.uk. An automated response will be received. The subject line should include:
- property address, including postcode
- effective date of the option to tax notification
The automated response will have the date when the notification was received by HMRC, which should be kept for the opter's records.
A notification sent any other way than by email, will not get an acknowledgement or receipt. HMRC will, however, respond if it needs more information.
These changes will not impact how HMRC handles belated notifications.
Processing requests about OTTs
HMRC will stop processing requests to confirm the existence of an Option to Tax, except in certain specified circumstances.
HMRC reminds businesses that it is their responsibility, when notifying an option tax, to keep the information as part of their business records. These should be kept for at least six years. For further information see:
HMRC will only check whether a record of an option to tax is held for the relevant property, if a request is made under one of the following conditions:
- the effective opted date is likely to be over 6 years ago
- if you’ve been appointed as a Land and Property Act receiver, or an insolvency practitioner to administer the property in question
If these conditions are met, HMRC will ask you to provide details for the associated land or property, or both. This must be accompanied by a letter or deed of appointment for your role, otherwise HMRC will be unable to help.
The following details must be provided:
- name of the business or person who opted to tax the property
- VAT registration number (if applicable)
- full address of the land or property in question, including postcode
- effective date of the option to tax, if known
- date you first charged VAT on the opted land or property
- date the property was either acquired or a loan was taken out (or both) by the opter on the relevant property
The ICAS consultation response raised some questions about these conditions, but these have not been addressed.
Publication of HMRC guidance on the new VAT penalties regime
An ICAS article on the changes to the VAT penalty regime was published in November 2022. On 4 January, HMRC published guidance on the new regime. A collection page has been created to host links to the individual guidance pages:
Penalty points and penalties if you submit your VAT Return late
Remove penalty points you’ve received after submitting your VAT Return late
How late payment penalties work if you pay VAT late
Late payment interest if you do not pay VAT or penalties on time
Repayment interest on VAT credits or overpayments
Let us know your views
We welcome Members’ input on consultations or other tax-related matters – email tax@icas.com to share your insights and feedback. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by Members.
