HMRC has published Public Notice 742A . Changes were made in connection to authorised signatories, in particular; corporate bodies, overseas entities and powers of attorney. It is important to establish who can sign an option to tax (OTT) form VAT1614A as getting it wrong may invalidate an OTT with potentially very expensive consequences.
A guide to the OTT here.
It seems an appropriate time to look at who can sign an OTT form. HMRC guidance states:
“The person responsible for making the decision and notifying the option to tax depends on the type of legal entity holding (or intending to hold) the interest in the land or building, and who within that entity has the authority to make decisions concerning VAT. In most cases it will be the sole proprietor, one or more partners (or trustees), a director or an authorised administrator. If you have appointed a third party to notify an option to tax on your behalf, HMRC requires written confirmation that the third party is authorised to do so.”
Some specific situations:
Beneficial owners
In cases where there is both a beneficial owner and a legal owner of land or buildings for VAT purposes it is the beneficial owner who is making the supply of the land or building. It is therefore the beneficial owner who should OTT. This may not be the case where the beneficiaries are numerous, such as unit trusts and pension funds. In these cases, the person deemed to be making the supply is the trustee who holds the legal interest and receives the immediate benefit of the consideration.
Joint owners
Joint ownership is where two entities purchase land or buildings together, or one party sells a share in property to another party. Usually, a supply may only be made by both entities together. The two entities should OTT together as a single option and register for VAT account for output tax as a single entity (usually a partnership even if it is not a partnership for any other purpose.).
Limited partnerships
Under the Limited Partnership Act 1907 every limited partnership must be registered with Companies House. A limited partnership is made up of one or more general partners, who have unlimited liability, and one or more ‘limited’ partners, who are not liable for debts and obligations of the firm. A limited partner is unable to take part in the management.
If there is only one general partner and one or more limited partners, the general partner is treated as a sole proprietor for VAT registration purposes. If there are two or more general partners and one or more limited partners, the general partners are treated as a partnership. It is the general partners who should OTT.
Limited liability partnerships (LLPs)
An LLP has separate legal status from its members and is able to enter into contracts in its own right. An LLP is a body corporate and is may register for VAT. If the partnership decides to OTT, one or more members, as the authorised signatory must sign the notification.
Authorised persons for particular legal entities
In order for an OTT to be notified effectively, it must be signed and dated by an authorised person who possesses the legal capacity to notify a decision.
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 or member |
| Unincorporated Association | Chairperson, treasurer, trustee or company secretary |
| Limited company | Company director or company secretary |
| Community Interest Company (CIC) | Company director or company secretary |
| Charitable Incorporated Organisation | Director, chairperson, treasurer, trustee, or company secretary |
| Community Benefit Society | Chairperson, treasurer, trustee or company secretary |
| Local Authority | Section 151 officer (or Section 95 officer in Scotland), town clerk, head of finance, or treasurer |
| VAT group | Director or company secretary of the group member that owns the property |
| Government department | Nominated VAT liaison officer or finance manager (or a person senior to either) |
| Corporate body acting as a director, trustee or company secretary | Any office holder or employee authorised by the corporate body (as long as the corporate body itself has authorisation from the owner the property) |
| Overseas entity | Director or manager |
| Power of attorney | Anyone granted a power of attorney to administer or manage the tax affairs of the owner of a property |
Commentary
An invalid OTT may result in, among other things:
- Input tax recovery being barred
- A potential Transfer of a Going Concern (TOGC) becoming subject to VAT
- VAT registration being denied
- Unwanted complexity in transactions with the potential for a deal to be aborted
- Costs in unwinding the VAT position (if firefighting is possible)
- Uncertainty
- Delays in transactions
- A dispute between two sides to a transaction
- Past input tax being the subject of clawback
- The Capital Goods Scheme (CGS) being triggered resulting in VAT costs and complexity
- HMRC levying penalties and interest
It is important to get the, seemingly simple, process of OTT right, and right first time!