V4.111 Exemption—land and buildings

Land and buildings

V4.111 Exemption—land and buildings

European legislation

The exemption for transactions relating to land is derived from Directive 2006/112/EC, arts 135(1)(j)–(l)1. Essentially, this relates to the leasing or letting of immovable property2, the supply of a building (other than a supply prior to first occupation) and the land on which it stands, and the supply of land which has not been built on (other than building land, as defined – albeit loosely – in Directive 2006/112/EEC, art 12). The ratio legis underlying the distinction between (broadly) old and new buildings, and (by implication) between building land and other land, has been described as follows3:

The ratio legis of those provisions is the relative lack of added value generated by the sale of an old building. Even though it raises the concept of 'economic activity', within the meaning of Article 9 of the VAT Directive, the sale of a building following its first supply to a final consumer, which marks the end of the production process, does not generate any significant added value and must therefore, as a rule, be exempt.

Despite the exclusion of building land from exemption by Directive 2006/112/EC, art 135(1)(k), the ECJ has held that the UK is entitled to retain its pre-existing exemption under Directive 2006/112/EC, art 371 and Annex X Part B (formerly Directive 77/388/EEC, art 28(3)(b) and Annex F)4. For cases involving the meaning of building land, see Don Bosco Onroerend Goed BV v Staatssecretaris van

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