Until now, due diligence has usually involved sight of both the OTT and the corresponding acknowledgement or receipt letter from HMRC. However, a change in HMRC procedure means that the seller of any property which is opted to tax after 1 February 2023 will not be able to provide an HMRC acknowledgment or receipt.

New rules

From 1 February 2023, HMRC has ceased to issue option to tax notification receipt letters and instead will only send an automated email response. In addition, it has stopped processing requests for confirmation that an OTT has been made, save in very limited circumstances.

Consequences

Going forward, a seller (or landlord) who has opted to tax after 1 February 2023 should not be expected to be able to provide a copy of an HMRC acknowledgment as none will have been issued. The only available evidence from HMRC will be the automated email response. It will therefore be critical that any landowner opting to tax keeps both the automated email response and a full record of the OTT itself.

Further, if an OTT was made prior to the commencement of the new rules, any landowner who has not retained its own records may now find it much more difficult to obtain confirmation from HMRC. In particular, otherwise than in insolvency scenarios, HMRC will no longer provide confirmations where OTTs were made within the period of 6 years before the request (that being the period for which VAT records are required to be kept by those registered for VAT).

It is not strictly necessary to have an HMRC acknowledgment – or automated email response – in order to constitute 'proof' of an OTT having been made. Provided the original OTT has been retained, most parties will be content to proceed with that as evidence. However, if no copy of the original OTT can be located either, this may now cause issues (and delay) when seeking to sell or let a property.

Action required

The message now is to put (and keep) your house in order.

Going forward, we recommend that all OTTs should be submitted via email (as only electronically submitted OTTs will receive the automated HMRC response). A full record of the OTT itself, the submission email and HMRC's automated reply should be retained safely.

Where an OTT has been submitted in the past, landowners intending to sell or let their property should check at an early stage that they have a complete record of the OTT and should ensure that this is safely retained for the future.