Simplifying the VAT Land Exemption

14 May 2021

office building

HM Revenue & Customs (HMRC) has released a call for evidence to explore ways to simplify the VAT rules relating to land and property following the findings of the 2017 Office of Tax Simplification VAT review. Businesses are invited to comment on the current VAT rules in this sector and share their views on simplifying them, which includes responding to several ideas proposed by HMRC.

Sean McGinness, the firm’s head of VAT and also head of the firm’s Real Estate Group, commented: “The application of the exemption and the decision to opt to tax can have huge financial implications for transactions involving land that will be used for residential asset classes such as housing, PBSA and care and retirement living. We regularly see deals stalling or price negotiation because of the VAT status of the land. The consultation represents an opportunity for clients to make representations to HMRC to simplify this area and it is perhaps an opportunity for the UK government to use the post-Brexit VAT landscape to make more use of the zero-rate to assist the government’s ‘build, build, build’ strategy. Interestingly the zero-rate is not mentioned in the consultation document at all but it is hoped that HMRC will be open to suggestions relating to more modern contractual methods of delivering, for example, affordable housing.”

Saffery Champness will be consulting with its clients and responding to the consultation before the deadline of 3 August 2021. 

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