VAT Deregistration: HMRC Introduces Mandatory Disclosure of Options to Tax

HMRC has published new standalone guidance requiring businesses to formally disclose all options to tax on land or buildings when cancelling their VAT registration. The guidance, titled "Tell HMRC about an option to tax on property as part of cancelling your VAT registration", was published on 31 March 2026 and introduces a mandatory disclosure step that did not previously exist in the deregistration process.
 
Previously, the interaction between an existing option to tax and VAT deregistration was a matter for advisers to work through on a case-by-case basis. HMRC has now formalised this by requiring businesses to submit details of all opted properties as part of the deregistration process - whether currently held, previously disposed of, or subject to an option that has been disapplied or excluded.
 
The information required for each property is extensive: address and Land Registry title number, date of acquisition, previous owner details including VAT registration number, disposal date and value, purchaser details, and the date of any revocation. Submissions are made via Government Gateway, with a bulk upload template available where five or more properties are involved.
 
The practical risk areas this process is designed to capture are well-established: the deemed supply on deregistration where opted property is retained, Capital Goods Scheme clawbacks where adjustment periods remain open, and continuing exposure on future supplies or disposals where the option has not been formally revoked before deregistration takes effect. The new guidance makes clear that where VAT is due on a disposal of opted property, it must be declared on the appropriate return before the registration is cancelled.
 
It is also worth bearing in mind that an option to tax takes legal effect when made, regardless of whether HMRC acknowledges it - and HMRC no longer issues acknowledgement letters. The evidential burden of proving notification therefore rests entirely with the business. Where a client is approaching deregistration with any property history involving an option to tax, a thorough property audit before initiating the process is now essential.
 
If you are advising a business through a VAT deregistration and there is any land or property interest in the picture, VITA can assist with the review. Contact us to discuss.

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