VAT on property

VAT on property

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 no VAT is payable, but the person making the supply cannot usually recover any of the VAT (the input tax) incurred on their expenses, such as in relation to building work and fees.

In practice, the exceptions mean that most dealings in commercial property are not, in fact, exempt, and that exemption is only really the norm for lettings of residential property. Since exemption is not always a desirable result, active steps may need to be taken to fall outside it.

Where exemption applies, it will cover the sale price or premium, any rent and anything else paid by way of consideration for the interest in land. This generally extends to service charges

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Latest Tax News

Tax weekly highlights—6 November 2025

This week's edition of Tax weekly highlights includes: (1) analysis of the First-tier Tax Tribunal’s (FTT) decision in Ferrero UK Ltd v HMRC concerning the VAT treatment of biscuits, (2) further analysis of the Supreme Court’s decision in Northumbria Healthcare NHS Foundation Trust v HMRC concerning the VAT treatment of car parking supplies by a public body, (3) analysis of the FTT’s decision in Boulting v HMRC concerning the tax treatment of a company’s purchase of its own shares from an outgoing shareholder, (4) analysis of the Upper Tribunal’s (UT) decision in HMRC v Ducas Ltd concerning the FTT’s powers to direct extended disclosure of documents by one party but not the other, and (5) the Welsh Government’s publication of its Draft Detailed Budget Report for 2026-27 and a consultation on Welsh taxes reform.

UT rules that there is no general principle that extended disclosure in FTT proceedings must be reciprocal (HMRC v Ducas Ltd)

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Supreme Court rules that hospital car parking charges are subject to VAT (Northumbria Healthcare NHS Foundation Trust v HMRC)

Tax analysis: In Northumbria Healthcare NHS Foundation Trust v HMRC, the Supreme Court decided that supplies of hospital car parking by an NHS Trust were subject to VAT because the Trust was acting as a taxable person, rather than as a public authority, when it operated the car parks. This was because the legal conditions under which the Trust made the supplies were no different, because of the Trust’s function as a public authority, from the legal conditions under which private sector providers made similar services.