VAT on property

VAT on property

FORTHCOMING CHANGE: HMRC published a call for evidence, ‘Simplifying the VAT Land Exemption’, in May 2021, inviting comments on some radical suggestions for the future scope of the exemption. These included making all ‘short-term or minor’ interests in land subject to VAT, or removing the current ‘option to tax’ rules and instead making all land transactions VATable, subject to specific exemptions such as for property with a residential or charitable purpose. The call for evidence ran from 12 May 2021 to 3 August 2021, and HMRC intends to hold further discussions with businesses in 2022. For more information, see News Analysis: Views on HMRC’s proposals to simplify VAT land exemption rules.

There are multiple VAT issues that arise in a property context. For a checklist-style summary of the key VAT issues to consider when undertaking a property transaction, see: VAT on property transactions—checklist.

The default position is that most supplies of interests in or rights over land and buildings (including freehold sales and leasing) are exempt from VAT, but there are many exceptions.

The effect of making an exempt supply of land is that

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Tax News

Court of Appeal confirms that loans made under remuneration trust arrangements were taxable as disguised remuneration and related payments were not deductible (Marlborough DP Limited v HMRC)

Tax analysis: In Marlborough DP Ltd, the Court of Appeal dismissed the taxpayer’s appeal and upheld the decision of the Upper Tribunal (UT), confirming that loans made to a director under a remuneration trust (RT) scheme were taxable under the disguised remuneration legislation in Part 7A of the Income Tax Earnings and Pensions Act 2003 (ITEPA 2003) as being ‘in connection with’ employment. The court also agreed that the related payments were not deductible for corporation tax purposes, as they were not incurred wholly and exclusively for the purposes of the company’s trade.

UT holds that VAT exemption did not apply for single composite supply of financial services (JPMorgan Chase Bank NA v HMRC)

Tax analysis: In JPMorgan Chase Bank NA the Upper Tribunal (UT) dismissed the company’s appeal and upheld the First-Tier Tribunal (FTT) decision that the supply of intra-group services was a single composite taxable supply and the VAT exemption for financial services did not apply.

Supreme Court rules that the hire cap under the oil contractor regime applied to restrict deductions (HMRC v Dolphin Drilling Ltd)

Tax analysis: In Dolphin Drilling, the Supreme Court dismissed the company’s appeal, deciding that the ‘hire cap’ under the oil contractor regime applied to restrict the corporation tax deduction available to it for the cost of chartering a tender support vessel (TSV).

Tax weekly highlights—26 June 2025

This week's edition of Tax weekly highlights includes: (1) the Supreme Court’s decision in HMRC v Dolphin Drilling, (2) confirmation that the PISCES stamp tax exemption Regulations are to come into force on 3 July 2025 and (3) News Analyses on previously reported decisions Osmond and Allen v HMRC (on main purpose under ITA 2007, s 687), Smart v HMRC (on ‘receiving or entitled’ to income), Conservatory Insulations Northwest Ltd v HMRC (on VAT assessment time limits) and BGC Services Holdings LLP v HMRC (on the refusal of HMRC’s case management decisions permission to appeal application).