ACCA Advanced Taxation (ATX) Practice Exam

What is the maximum duration for which the opting to tax (OTT) election is irrevocable?

1. 10 years

2. 15 years

3. 20 years

4. 25 years

The correct answer is: 20 years

The correct answer is 20 years, reflecting the stipulations regarding the opting to tax for land and buildings under UK VAT legislation. When a business makes an election to tax certain supplies of land and buildings, this election becomes irrevocable for a maximum period of 20 years. This means that once the election is made, the business must adhere to the tax implications of that decision for 20 years, without the option to reverse the decision within that timeframe. This rule is designed to provide a degree of stability and predictability for tax planning for both the taxpayer and revenue authorities. During this period, the business must continue to comply with VAT obligations related to the taxable supplies they have opted to tax. Understanding this irrevocability is crucial for businesses considering their VAT obligations, as the long-term effects of such an election can significantly impact cash flow and tax liabilities over the years. Hence, the 20-year duration is a key element of the opting to tax provisions, reinforcing the importance of thoughtful planning and consideration prior to making the election.