In William Newman v HMRC [2021] TC08147, the First Tier Tribunal (FTT) struck out the taxpayer’s appeal against HMRC’s refusal to accept a late 'option to tax' notification.

  • In 2014, the freeholder of a pub offered to sell it to Mr Newman, the tenant-landlord, for £1.3m plus £234,000 VAT.
  • Mr Newman found another party to sell the pub on to, for an agreed £1.8m plus VAT of £360,000.
    • These transactions were completed on 22 May 2014.
  • A late VAT return was submitted for the relevant quarter containing nil entries.
  • Following an application for VAT deregistration in November 2014, HMRC issued a demand for £360,000 of unpaid VAT.
  • In October 2015, HMRC’s permission was sought for a retrospective Option To Tax (OTT).
    • This was subsequently corrected to be a delayed notification of an OTT. This notification was not accepted by HMRC.
  • A considerable amount of correspondence followed with Mr Newman's changing advisers.
  • Ultimately, Mr Newman appealed to the FTT in February 2019, in respect of HMRC’s refusal to accept the late notification of an OTT.

The FTT considered whether Mr Newman had made an effective OTT prior to 22 May 2014.

  • If an effective OTT was not made, the sale of the pub by Mr Newman would have been exempt from VAT.
    • The £360,000 VAT erroneously charged on the sale by Mr Newman would be payable to HMRC as a debt to the crown under para 5(2), sch 11, VATA 1994.
    • No credit would be available for the £234,000 input VAT paid.
  • If an effective OTT was made, the sale of the pub by Mr Newman would have been taxable.
    • Credit should be given for the £234,000 input VAT paid, with a net sum of £126,000 (not £360,000) due to HMRC.

An OTT should usually be notified to HMRC within 30 days of the decision, although HMRC may allow late notifications. For example, the 30-day deadline has currently been Extended to 90 days, due to Coronavirus. 

The FTT found that:

  • Mr Newman did make an OTT election before 21 May 2014, evidenced by reference to VAT in the sale contract and correspondence with solicitors.
  • An OTT election is only effective when notified to HMRC within the allowed time. This was not the case here and HMRC had not allowed a longer period for notification in this instance.
  • Although Mr Newman’s advisers were responsible for much of the delay, there was little explanation of what happened between 2016 and 2018, nor of details of Mr Newman’s own position.
  • The advisors’ faults did not provide a good enough reason for allowing the appeal to be heard so late.

Mr Newman's appeal was struck out.


When land and property transactions involve VAT, the numbers are inevitably large. This case serves as a timely reminder that failing to meet deadlines can result in significant tax costs.  

In concluding, Judge Hellier commented that: “The ability of HMRC to allow more time for notification in para 20 Sch 10 is not time-limited. HMRC might therefore consider whether, if the tax which would arise if the option were effective had been paid, they could allow the extra time sought.”

Useful guides on this topic

Opting to tax land and property
What is an option to tax? What do I need to do to opt to tax? What happens if I buy an opted property?

COVID-19: Option to tax deadline extended
HMRC have announced that, due to the Coronavirus pandemic, they are again extending the deadline for notifying them about an option to tax on land and buildings to 90 days.

Land & Property VAT (Subscriber guide)
An outline of the VAT treatment of some of the more common supplies of land and property.

Land & Property VAT at a glance
A summary of VAT on common land and property transactions.

Land & Property: Non-residential
This guide considers the VAT treatment of the supply of non-residential property.

External link

William Newman v HMRC [2021] TC08147

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