Can You Revoke an Option to Tax After 20 Years?

Yes, you can revoke an option to tax once more than 20 years have passed since it first took effect. The right sits in paragraph 25 of Schedule 10 to the Value Added Tax Act 1994, and it works one of two ways: revocation by notification alone if you meet the statutory conditions, or revocation with HMRC’s prior permission if you fall short on one or more of them.¹ Either route uses the same form, VAT1614J, and neither is automatic. Get the conditions or the effective date wrong and the revocation can be delayed or invalidated.

Confirming the 20-Year Clock

The 20 years runs from the date your option first had effect, which is the date of your original decision or any later start date you specified when you notified HMRC.² It does not run from the date HMRC received or acknowledged the notification. Before doing anything else, dig out the original form or HMRC’s acknowledgment letter and confirm the exact effective date. If your records are incomplete, the Option to Tax National Unit can confirm what HMRC holds.³

Revoking Without HMRC Permission

Section G of VAT Notice 742A sets out the conditions with force of law. You can revoke without prior approval if you satisfy either Condition 1 on its own, or all of Conditions 2 through 5 together.²

Route One: You No Longer Hold an Interest

Condition 1 covers the simplest case. If neither you nor any connected relevant associate holds a relevant interest in the property at the time of revocation, and there are no outstanding supplies still to take place from a prior disposal, you can revoke by notification alone. The other conditions fall away, because once your connection to the property is gone the scope for lost tax is minimal.²

Route Two: You Still Hold the Property

If you or a connected associate still holds an interest, all four of the remaining conditions must be met:

Condition 2 requires that you or a connected relevant associate held a relevant interest in the property after the option took effect and more than 20 years before the revocation date.
Condition 3 requires that the property is not subject to ongoing Capital Goods Scheme input tax adjustments. There is a de minimis let-out: if the total adjustments that would be owed to HMRC for remaining intervals after revocation come to £10,000 or less, the condition is treated as met.²
Condition 4 requires that neither you nor a connected relevant associate has supplied a relevant interest in the property at below open market value, or through a relevant grant, in the 10 years immediately before revocation.
Condition 5 requires that no pre-payments received before revocation relate to supplies of the property that will be made more than 12 months after the revocation date.

Conditions 4 and 5 are anti-avoidance safeguards. They stop taxpayers from disposing of property at undervalue to a connected party, or from collecting rent upfront, to lock in VAT recovery just before pulling the option. Straightforward arm’s-length transactions rarely trigger them. Group structures and developer-to-investor chains involving connected parties are where they usually bite.

When You Need HMRC’s Permission

If you meet Condition 2 but fail one or more of Conditions 3, 4, or 5, you can still apply for permission to revoke. You submit the same form VAT1614J and include a full explanation of why the failing conditions cannot be met.⁴ HMRC may grant permission unconditionally, grant it subject to conditions, or refuse. If they grant it on conditions and you later break one, they can treat the revocation as if it had never happened.¹

The most common reason for taking this route is a Capital Goods Scheme adjustment period that has not yet run its course. The CGS tracks input VAT recovery on land and property over a 10-year adjustment period, so if a major refurbishment or acquisition happened within the last decade, outstanding adjustments may still be due.⁵ HMRC will want to see the numbers before signing off.

How to Notify HMRC

Every 20-year revocation goes on form VAT1614J, whether you qualify automatically or are applying for permission.⁶ The form asks for:

The full property address, with a location plan or specific identifying details for bare land.
The date the option first had effect (not the date HMRC was notified).
The revocation date you want to apply. This cannot be earlier than the day you submit the form.
A signed declaration certifying that the relevant conditions are met. If someone other than the taxpayer or a company officer signs, a letter of authority must be attached.

Submit by post to BT VAT, HM Revenue and Customs, BX9 1WR, or email a scanned copy to optiontotaxnationalunit@hmrc.gov.uk. Email tends to produce a faster acknowledgment and a cleaner audit trail.³ HMRC will issue an acknowledgment confirming the revocation has been recorded; keep it with your VAT records.

One point to correct, because it comes up often: there is no 30-day deadline for notifying a revocation. The rule runs the other way. Your revocation takes effect from the date you specify on the form, and that date cannot be before the day you submit.² The 30-day rule you may have seen applies to notifying HMRC of the original option, not to revoking it.

What Changes on the Revocation Date

From the effective date, supplies of the property revert to VAT-exempt. You stop charging VAT on rent, sales, and other supplies connected to the land. You also lose the right to reclaim input VAT on costs relating to that property. If you use a partial exemption method, the switch can move your recoverable percentage across the whole business, not just on the property in question.

Existing leases need a look. If a lease specifies rent “plus VAT,” the VAT element falls away once the option is revoked, but the contractual rent itself may not adjust automatically. Check the lease and vary it formally if needed. Tenants who were recovering the VAT charge see no net difference; tenants making exempt supplies see their occupation costs fall by 20%.

If Capital Goods Scheme intervals fall after the revocation date, adjustments may still be required because the property’s use has moved from taxable to exempt. That is why Condition 3 exists: to stop taxpayers revoking and then owing large clawback amounts. The £10,000 de minimis threshold keeps minor residual adjustments from blocking a revocation.²

Check Whether the Option Has Already Lapsed

Before submitting a 20-year revocation, consider whether the option is still in force. Under paragraph 24 of Schedule 10, an option is treated as revoked if you hold no relevant interest in the property throughout any continuous six-year period after it took effect.¹ The lapse is automatic and needs no notification. Anti-avoidance rules in paragraph 26 can block it where outstanding supplies remain from a prior disposal, or where connected parties within a VAT group still hold an interest. If you sold the property years ago and have had no connection to it for more than six years, the option may already have gone without you knowing.

The separate six-month cooling-off route under paragraph 23 is not relevant at this stage; it only applies within the first six months of an option, and between that window and the 20-year mark there is no general right to revoke. Owners who still hold the property are locked in for the full period.

1
legislation.gov.uk. Value Added Tax Act 1994 Schedule 10
2
GOV.UK. Opting to tax land and buildings (VAT Notice 742A)
3
HM Revenue & Customs. VAT: option to tax enquiries
4
HM Revenue and Customs. Opting to tax land and buildings: revoking an option to tax after 20 years
5
HM Revenue & Customs. Capital Goods Scheme (VAT Notice 706/2)
6
GOV.UK. Revoke an option to tax after 20 years have passed