HMRC has added a new paragraph 7.6 entitled “Authorised persons for particular legal entities” (see below), to notice 742A: Opting to tax land and buildings. This new paragraph confirms that HMRC are conducting reviews of option to tax notifications. In particular, they are checking that the notification is signed by the person with legal capacity to notify the option. Where the notification is signed by a person who, according to the table in paragraph 7.6, is not within the category of persons having legal capacity, the person signing must have actual authority to sign confirmed in accordance with the requirements of that paragraph.
For example, an option to tax notification by a company should be signed by a director of the company or by the company secretary, or by another person (eg a tax manager) who has been authorised in writing to sign in a letter of authorisation which complies with the above guidance. HMRC state that they will reject an option to tax notification which is not signed by such a person.
Checking that the notification is correctly signed is particularly important where the VAT treatment of a transaction is dependent on a valid option to tax being made and notified to HMRC. For example, when acting for a seller who is selling a property on the basis that the sale will be treated as a TOGC, one should ensure that the option to tax notification by the buyer has been signed by a person having legal capacity or authority to sign. It is recommended that, in such cases, an appropriate warranty should be incorporated into the contract to confirm the position.
7.6 Authorised persons for particular legal entities
In order for an option to tax to be notified effectively, (whether on a VAT 1614A form or by alternative means), it must be signed and dated by an authorised person who possesses the legal capacity to notify HMRC of such a decision.
If the signatory is not an authorised person, or has not had such authority granted to them by means of an authorisation letter signed and dated by an authorised person, then the notification of an option to tax will be rejected as the relevant information required has not been provided.
A letter of authorisation must make it clear that the person being authorised to act on behalf of the opter is doing so with the full authority of the opter to act as a representative of the opter in all, or some, matters pertaining to the option to tax.
The minimum requirements for an authorisation letter are the:
opters name and address
name and signature of the authorised person
name, address, signature and date of the person authorised by the opter to act on their behalf
opters agreement to be bound by the actions of the person they have authorised in respect of Part 1, Schedule 10 of the VATA 1994 (this will include opting to tax, seeking permission and revoking an option to tax unless specified otherwise)
Suggested form of words for an authorisation letter
This letter authorises (the named person) to act as our agent in all matters relating to the notification and submission of an option to tax on our behalf and in all matters covered in Part 1, Schedule 10 of the VAT Act 1994 unless otherwise specified in writing.
Signed (insert authorised signature as per table) and date.
Signed (insert signature of person being authorised) and date.
List of authorised signatories:
|Legal entity||Authorised persons|
|Sole trader (proprietor)||Owner of the business|
|Trust||Trustee (or partner if VAT2 is completed)|
|Partnership (UK)||Any partner (on VAT2)|
|Partnership (Scotland)||Any partner|
|Limited partnership (UK)||General Partner|
|Limited partnership (Scotland)||General Partner|
|Limited Liability Partnership||Designated member/Member|
|Limited company||Company director/Company secretary|
|Community Interest Company (CIC)||Company director/Company secretary|
|Charitable Incorporated Organisation (CIO)||Director/Chairperson/Treasurer/Trustee/Secretary|
|Community Benefit Society (BenCom)||Chairperson/Treasurer/Trustee/Secretary|
|Local Authority||Section 151 Officer (or Section 95 officer in Scotland)/Town Clerk/Head of finance/Treasurer|
|VAT group||Director or Company secretary of the group member that owns the property|
|Government departments||Nominated VAT liaison officer/Finance manager (or a person senior to either)|