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

Tax weekly highlights—1 May 2025

This week's edition of Tax weekly highlights includes: (1) coverage of the numerous ‘Tax update spring 2025’ announcements and publications, (2) an update from the CIOT on the LLP salaried member rules and (3) News Analyses on the Upper Tribunal’s (UT) decision on an SDLT overpayment relief claim (L-L-O Contracting Ltd) and on the First-tier Tax Tribunal’s (FTT) decisions on (i) the remedy available under FA 2003, Sch 10, para 34 when no other SDLT relief is available (Candy), (ii) the effect of liquidation on a director loan (Quillan) and (iii) a legislative drafting error in respect of the temporary reduced rate of VAT (JD Wetherspoon).

Tax update spring 2025—Tax analysis

Tax analysis: On 28 April 2025, the government announced a package of technical tax policy proposals aimed at simplifying and reforming the tax system and improving tax administration. These announcements included the publication of draft legislation, new consultations, various technical papers and responses to consultations, as well as updates on previously announced measures together with new initiatives.

Upper Tribunal denies SDLT overpayment relief in failed late MDR claim (L-L-O Contracting Ltd and others v HMRC)

Tax analysis: In L-L-O Contracting Ltd and others v HMRC, the Upper Tribunal (UT) dismissed the companies’ appeals against the First-tier Tax Tribunal’s (FTT) decision to dismiss appeals against HMRC’s decision not to allow claims to SDLT overpayment relief. The companies had not claimed multiple dwellings relief (MDR) in their SDLT returns and, having missed the time limit for making the claims, sought to obtain the relief by way of overpayment relief claims under paragraph 34 of Schedule 10 of the Finance Act 2003 (FA 2003).

FTT concludes cider supplies did not benefit from temporary reduced VAT rate (JD Wetherspoon PLC v HMRC)

Tax analysis: In JD Wetherspoon PLC v HMRC, the FTT decided that for the purposes of the temporary reduced VAT rate for hospitality and tourism, cider should be classified as an ‘alcoholic beverage’ and thus excluded from the reduced rate. The issue arose because a drafting error in the relevant legislation meant that cider was not included in the definition of an alcoholic beverage, however, the FTT applied the Inco principle to correct obvious drafting errors, and the taxpayer claim was therefore dismissed.