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VAT Tribunal Says Adviser’s Unauthorised Option To Tax Was Not Invalidly Made

VAT Tribunal Says Adviser’s Unauthorised Option To Tax Was Not Invalidly Made

This case illustrates the disasters that can still occur when the option to tax position for a building is not fully considered.


The Appellant purchased a non-opted tenanted commercial property with the intention of obtaining planning permission for residential conversion. The Appellant's advisers submitted a VAT 1 and VAT 1614 option notification, both signed by the Appellant (the decision suggests a number of reasons why it may have been thought necessary to apply for VAT registration and opt). The Appellant subsequently completed a questionnaire, and answered telephone questions on the application from HMRC. However, the major tenant was a charity whose lease provided that, if the landlord opted to tax, the rent would be deemed VAT-inclusive. When it came to invoicing for rents, the significance of the option was brought into focus, and the Appellant instructed the managing agents not to charge VAT.


The Appellant argued to HMRC that the option notification was invalid on the basis that the adviser did not have authority to lodge it (or at least not at the time it was lodged) and that the Appellant had not intended an option to take effect as evidenced by its subsequent actions. HMRC rejected this argument.


The Tribunal held that, notwithstanding the clear misunderstandings, the two actions necessary for a valid option - the act of opting and the notification of it - were present at the time on the part of the Appellant, who could not 'hide behind' his advisers.  The appeal was thus dismissed.