Tag Archives: vat-land

The ABC of VAT – property

By Marcus Ward 15 December 2025

A glossary

Anyone who has had even the slightest brush with VAT will know that it is a very complex tax. Now, multiply that complexity by the intricacy and occasionally arcane nature of property law and one may see that the outcome will be less than straightforward. I have produced a general guide and an article on residential property VAT Triggerpoints

I hope the following glossary will help with steering through some of the difficulties.

Annex– a building which is joined to or is next to a larger main building usually an extension or addition to a building
Assign – to transfer the right or interest in a property from one party to another
Break clause – a clause allowing either landlord or tenant to give written notice after a particular date or period of the tenancy in order to end the tenancy
Beneficial owner – party deemed to make a supply of property rather than the legal owner
Blocked input tax – VAT which a developer is unable to recover when constructing a new dwelling. Typically, expenditure on good such as; carpets, fitted furniture, and gas and electrical appliances
Building materials– goods ordinarily incorporated into a property which attracts similar VAT treatment to the construction services.
Capital Goods Scheme(CGS) – a method of calculating the recovery amount of input tax incurred on property over a ten-year period, Details of the CGS here
Certificate – a document issued to a supplier in order to obtain certain zero-rated or reduced-rated building work
Change of number of dwellings– usually a conversion from commercial to residential, or a single house into flats (or flats into a single house) at 5% VAT
Consideration– a thing done or given in exchange for something else = a supply. Usually quantified in money, but in some cases non-monetary consideration
Construction of new dwellings – a zero rated supply
Contract – legal document detailing the agreement of terms between the vendor and buyer
Contractor – entity responsible for building works
Conversion–work on a non-residential building which results in a property designed as a dwelling(s) being created
Covenants – rules governing the property in its title deeds or lease. May impact the definition of dwellings
Curtilage– either a garden, or an area surrounding a building which is deemed to be part of the property
Designed as a dwelling– a property initially designed for residential use, regardless of any subsequent alternative use
Dilapidations – items that have been damaged during a tenancy for which the tenant is responsible for the cost of repair or replacement. Usually VAT free
DIY Housebuilders’ Scheme – a scheme which ‘self-builders’ to recover VAT on a new build dwelling or conversion. Details here
Domestic Reverse Charge – a self-supply charge details here
Dwelling– a building deemed to be residential
Empty house – if, in the ten years before work on a dwelling starts, it has not been lived in, the work may be subject to 5% rather than 20% VAT
Exempt– a supply that is VAT free. It usually results in attributable input tax falling to be irrecoverable
Facade– a wall (or two walls on a corner plot) which may be retained without affecting the zero rating of a new dwelling construction
Grant– a supply of an interest in land
Holiday home – the sale or long lease of a holiday home cannot be zero-rated even if it is designed as a dwelling
Housing Association – a non-profit organisation which rents residential property to people on low incomes or with particular needs
In the course of construction– meaningful works that have occurred in relation to the construction of a building (but prior to its completion)
Incorporated goods – goods sold with a new dwelling which are zero rated and to which the input tax block does not apply. See white goods
Input tax– VAT incurred on expenditure associated with property
Interest in, or right over, land– the right to access to and use of, land. Usually via ownership or lease
Lease – legal document governing the occupation by the tenant of a premises for a specific length of time
Licence to occupy– a permission to use land that does not amount to a tenancy
Live-work units – a property that combines a dwelling and commercial or industrial working space. Usually subject to apportionment
Major interest–a supply of a freehold interest or a lease exceeding 21 years
Multiple occupancy dwelling – a dwelling which is designed for occupation by persons not forming a single household
New building–a commercial building less than three years old the sale of which is mandatorily standard
Non-residential– a commercial building which is not used as a dwelling
Open market value – likely sale price with a willing seller and buyer, with a reasonable period of marketing and no special factors affecting the property
Option to tax (OTT) – act of changing the exempt sale or letting of a commercial into a taxable supply. The purpose is to either; recover input tax or avoid input tax being charged. Details here
OTT disapplication– the legal removal of a vendor’s option to tax
OTT not applicable – the OTT does not apply to residential buildings (so VAT can never apply to dwellings)
OTT revocation– the ability to revoke an option to tax after six months or twenty years
Partial exemption– a calculation to attribute input tax to exempt and taxable. Generally, VAT incurred in respect of exempt supplies is irrecoverable
Person constructing – a developer, contractor or sub-contractor who constructs a building
Premium – upfront payment for a supply of property
Relevant Charitable Purpose (RCP)–the use by a charity for non-business purposes or for use as a village hall or similar
Relevant Residential Purpose (RRP)– dwelling used for certain defined residential purposes, eg; children’s home, a hospice or student accommodation
Reverse surrender– a tenant surrenders an onerous lease to the landlord and makes a payment to surrender
Share of freehold – where the freehold of the property is owned by a company and the shareholders are the owners of the property
Single household dwelling– a building designed for occupation by a single household
Snagging – the correction of building faults. Usually follows the VAT liability of the original work
Stamp Duty Land Tax (SDLT) – tax paid by a purchaser of a property. SDLT is increased if the sale of a commercial property is the subject of an option to tax
Substantial reconstruction– certain significant works to a listed building
Surrender– a tenant surrenders the lease to the landlord in return for payment
Taxable supply– a supply subject to VAT at the standard, reduced or zero-rate
Use as a dwelling – a building which was designed or adapted for use as someone’s home and is so used
Vendor – entity selling a property
Transfer of a Going Concern (TOGC) – the VAT free sale of the assets of a business as a going concern. This may include a tenanted property
Zero-rated– a taxable supply subject to VAT at a rate of 0%

We strongly recommend that advice is obtained if any property transaction is being undertaken.

Details of our land and property services may be found here.

VAT: Overages – new guidance

By Marcus Ward 6 October 2025

HMRC has issued new internal guidance on overages.

Land and property transactions are often complex and high value for VAT purposes. One area which we have been increasingly involved with is overages.

What is an overage?

An overage is an agreement whereby a purchaser of land agrees to pay the vendor an additional sum of money, in addition to the purchase price, following the occurrence of a future specified event that enhances the value of the land. This entitles the seller to a proportion of the enhanced value following the initial sale. Overages may also be called clawbacks, or uplifts.

Overages are popular with landowners who sell with the benefit of development potential and with buyers who may be able to purchase land at an initial low price with a condition that further payment will be made contingent on land increasing in value in the future – this may be as a result, of, say, obtaining Planning Permission.

VAT Treatment

HMRC consider that the VAT liability of overage should be considered separately from the VAT liability of the initial sale. HMRC’s policy is that the VAT liability of an overage payment will generally be determined at the time of supply of the overage payment, rather than when the original land sale completed.

Overage payments where an option to tax is made after the initial grant – where an option to tax is made after the property has been sold to the buyer, any subsequent overage payment may be liable to the standard rate of VAT as a result of VAT Act 1994, Schedule 10, Paragraph 31 (unless the option to tax has been disapplied, eg; where a property intended for use as a dwelling). In such situations, where the overage payment is made after the dwellings are constructed on the land, and the original grant was taxable by virtue of the option to tax, the option can be excluded in relation to the overage payment.

New commercial buildings – overage payments:

Where there is a grant of a freehold interest in a new (or incomplete) commercial building, the overage will always be taxable at the standard rate – it does not become exempt simply because three years or more have elapsed since the building was completed. This will remain the position if the overage falls due after the designation ‘new’ has expired after three years.
Where there has been a freehold sale of bare, un-opted land subject to an overage obligation, the liability of the overage payment will remain exempt even if a new commercial building is constructed on the site before the overage is paid.

This means that the VAT liability of the overage is determined by reference to the description of the land at the time that the original sale of the land takes place.

More on overages here. This covers HMRC’s previous views on overages .

VAT Land & Property: Who opts to tax? – Authorised signatories

By Marcus Ward 8 September 2025

Who opts to tax?

HMRC has published Public Notice 742A . Changes were made in connection to authorised signatories, in particular; corporate bodies, overseas entities and powers of attorney. It is important to establish who can sign an option to tax (OTT) form VAT1614A as getting it wrong may invalidate an OTT with potentially very expensive consequences.

A guide to the OTT here.

It seems an appropriate time to look at who can sign an OTT form. HMRC guidance states:

“The person responsible for making the decision and notifying the option to tax depends on the type of legal entity holding (or intending to hold) the interest in the land or building, and who within that entity has the authority to make decisions concerning VAT. In most cases it will be the sole proprietor, one or more partners (or trustees), a director or an authorised administrator. If you have appointed a third party to notify an option to tax on your behalf, HMRC requires written confirmation that the third party is authorised to do so.”

Some specific situations:

Beneficial owners

In cases where there is both a beneficial owner and a legal owner of land or buildings for VAT purposes it is the beneficial owner who is making the supply of the land or building. It is therefore the beneficial owner who should OTT. This may not be the case where the beneficiaries are numerous, such as unit trusts and pension funds. In these cases, the person deemed to be making the supply is the trustee who holds the legal interest and receives the immediate benefit of the consideration.

Joint owners

Joint ownership is where two entities purchase land or buildings together, or one party sells a share in property to another party. Usually, a supply may only be made by both entities together. The two entities should OTT together as a single option and register for VAT account for output tax as a single entity (usually a partnership even if it is not a partnership for any other purpose.).

Limited partnerships

Under the Limited Partnership Act 1907 every limited partnership must be registered with Companies House. A limited partnership is made up of one or more general partners, who have unlimited liability, and one or more ‘limited’ partners, who are not liable for debts and obligations of the firm. A limited partner is unable to take part in the management.

If there is only one general partner and one or more limited partners, the general partner is treated as a sole proprietor for VAT registration purposes. If there are two or more general partners and one or more limited partners, the general partners are treated as a partnership. It is the general partners who should OTT.

Limited liability partnerships (LLPs)

An LLP has separate legal status from its members and is able to enter into contracts in its own right. An LLP is a body corporate and is may register for VAT. If the partnership decides to OTT, one or more members, as the authorised signatory must sign the notification.

Authorised persons for particular legal entities

In order for an OTT to be notified effectively, it must be signed and dated by an authorised person who possesses the legal capacity to notify a decision.

List of authorised signatories

Legal entity	Authorised persons
Sole trader (proprietor)	Owner of the business
Trust	Trustee (or partner if VAT2 is completed)
Partnership (UK)	Any partner (on VAT2)
Partnership (Scotland)	Any partner
Limited partnership (UK)	General partner
Limited partnership (Scotland)	General partner
Limited Liability Partnership	Designated member or member
Unincorporated Association	Chairperson, treasurer, trustee or company secretary
Limited company	Company director or company secretary
Community Interest Company (CIC)	Company director or company secretary
Charitable Incorporated Organisation	Director, chairperson, treasurer, trustee, or company secretary
Community Benefit Society	Chairperson, treasurer, trustee or company secretary
Local Authority	Section 151 officer (or Section 95 officer in Scotland), town clerk, head of finance, or treasurer
VAT group	Director or company secretary of the group member that owns the property
Government department	Nominated VAT liaison officer or finance manager (or a person senior to either)
Corporate body acting as a director, trustee or company secretary	Any office holder or employee authorised by the corporate body (as long as the corporate body itself has authorisation from the owner the property)
Overseas entity	Director or manager
Power of attorney	Anyone granted a power of attorney to administer or manage the tax affairs of the owner of a property

Commentary

An invalid OTT may result in, among other things:

Input tax recovery being barred
A potential Transfer of a Going Concern (TOGC) becoming subject to VAT
VAT registration being denied
Unwanted complexity in transactions with the potential for a deal to be aborted
Costs in unwinding the VAT position (if firefighting is possible)
Uncertainty
Delays in transactions
A dispute between two sides to a transaction
Past input tax being the subject of clawback
The Capital Goods Scheme (CGS) being triggered resulting in VAT costs and complexity
HMRC levying penalties and interest

It is important to get the, seemingly simple, process of OTT right, and right first time!

VAT Notice 708: Buildings and construction updated

By Marcus Ward 1 July 2025

This Notice explains how to establish the appropriate VAT rate on building work and materials for contractors, sub-contractors and developers.

The construction of a new building and work to an existing building is normally standard rated. However, there are exceptions to this, inter alia:

construction of new qualifying dwellings and communal residential buildings, and certain new buildings used by charities ― zero-rated
conversion for a housing association of a non-residential building into a qualifying dwelling or communal residential building ― zero-rated
alterations to suit the condition of people with disabilities ― zero-rated
first time gas and electricity connections ― zero-rated
conversion of a non-residential building into a qualifying dwelling or communal residential building ― reduced rate of VAT 5%
renovation or alteration of empty residential premises ― reduced rate of VAT 5%
installation of energy saving materials, grant funded heating system measures and qualifying security goods ― reduced rate of VAT 5%
installation of mobility aids for the elderly for use in domestic accommodation ― reduced rate of VAT 5%

(These are just some examples; other works may also qualify for zero or reduced rating)

Amendments

Paragraph 7 (re: the conversion of premises to a different residential use) on reduced rated work has been amended at para 7.6 as there was uncertainty over the previous drafting.

Paragraph 8.4 has been revised to more accurately reflect the rules on the installation of building materials which are reduce rated.

VAT Success Stories

By Marcus Ward 22 April 2025

I often write about how it is important to seek VAT advice at the right time, see triggerpoints. So, I thought that I’d give some practical examples on where we have saved our clients money, time and aggravation.

Investment company

HMRC denied claims for input tax incurred on costs relating to the potential acquisition of an overseas business and threatened to deregister the plc as it was not, currently, making taxable supplies. Additionally, HMRC contended that even if VAT registration was appropriate, the input tax incurred did not relate to taxable supplies and was therefore blocked.

We were able to persuade HMRC that our client had a right to be VAT registered because it intended to make taxable supplies (supplies with a place of supply outside the UK which would have been taxable if made in the UK) and that the input tax was recoverable as it related to these intended taxable supplies (management charges to the acquired business). This is a hot topic at the moment, but we were able to eventually demonstrate, with considerable and detailed evidence that there was a true intention.

This meant that UK VAT registration was correct and input tax running into hundreds of thousands of pounds incurred in the UK was repaid to our client.

Restaurant

We identified and submitted a claim for a West End restaurant for nearly £300,000 overpaid output tax. We finally agreed the repayment with HMRC after dealing with issues such as the quantum of the claim and unjust enrichment.

Developer

Our property developing client specialises in very high-end residential projects in exclusive parts of London. They built a dwelling using an existing façade and part of a side elevation. We contended that it was a new build (zero rated sale and no VAT on construction costs and full input tax recovery on other costs). HMRC took the view that it was work on an existing dwelling so that 5% applied and input tax was not recoverable. After site visits, detailed plans, current and historical photograph evidence HMRC accepted the holy grail of new build. The overall cost of the project was tens of millions.

Charity

A charity client was supplying services to the NHS. The issue was whether they were standard rated supplies of staff or exempt medical services. We argued successfully that, despite previous rulings, the supplies were exempt, which benefited all parties. Our client was able to deregister from VAT, but not only that, we persuaded HMRC that input tax previously claimed could be kept. This was a rather pleasant surprise outcome. We also avoided any penalties and interest so that VAT did not represent a cost to the charity in any way. If the VAT was required to be repaid to HMRC it is likely that the charity would have been wound up.

Shoot

A group of friends met to shoot game as a hobby. They made financial contributions to the syndicate in order to take part. HMRC considered that this was a business activity and threatened to go back over 40 years and assess for output tax on the syndicate’s takings which amounted to many hundreds of thousands of pounds and would have meant the shoot could not continue. We appealed the decision to retrospectively register the syndicate.

After a four-year battle HMRC settled on the steps of the Tribunal. We were able to demonstrate that the syndicate was run on a cost sharing basis and is not “an activity likely to be carried out by a private undertaking on a market, organised within a professional framework and generally performed in the interest of generating a profit.” – A happy client.

Chemist

We assisted a chemist client who, for unfortunate reasons, had not been able to submit proper VAT returns for a number of years. We were able to reconstruct the VAT records which showed a repayment of circa £500,000 of VAT was due. We successfully negotiated with HMRC and assisted with the inspection which was generated by the claim.

The message? Never accept a HMRC decision, and seek good advice!

VAT: Property – The Option To Tax Guide

By Marcus Ward 8 January 2025

VAT Basics

Opting To Tax commercial property

Opting to tax provides a unique situation in the VAT world. It is the only example of where a supplier can choose to add VAT to a supply….. or not.

What is an option to tax (OTT)?

The sale or letting of a property is, in most cases, exempt (VAT free) by default. However, it is possible to apply the OTT to commercial property. This has the result of turning an exempt supply into a taxable supply at the standard rate. It should be noted that an OTT made in respect of a residential property is disregarded and consequently, the supply of residential properties is always exempt (unless it is the first time sale of a new build – in which case it is zero-rated).

Why opt?

Why would a supplier then deliberately choose to add VAT on a supply?

The only purpose of OTT is to enable the optor to recover or avoid input tax incurred in relation to the relevant land or property. The OTT is a decision solely for the property owner or landlord and the purchaser or tenant is not able to affect the OTT unless specific clauses are included in the lease or purchase contracts. Care should be taken to ensure that existing contracts permit the OTT to be taken. Despite a lot of misleading commentary and confusion, it is worth bearing in mind that the recovery or avoidance of input tax is the sole reason to OTT.

Once made the OTT is usually irrevocable for a 20-year period (although there are circumstances where it may be revisited within six months of it being taken – see below). There are specific rules for circumstances where the optor has previously made exempt supplies of the relevant land or property. In these cases, HMRC’s permission must usually be obtained before the option can be made.

What to consider

The important questions to be asked before a property transaction are:

Was VAT incurred on the purchase price?
Is the purchase with the benefit of an existing lease (will the tenant remain?) if so, it may be possible to treat the transaction as a VAT free TOGC (see below)
Is the property subject to the Capital Goods Scheme (CGS here)?
Is it intended to spend significant amounts on the property, eg; refurbishment?
What other costs will be incurred in respect of the property?
If renting the property out – will the lease granted be full tenant repairing?
Will the tenant or purchaser be in a position to recover any or all VAT charged on the rent/sale?

These are the basic questions to be addressed; further factors may need to be considered depending on the facts of a transaction.

Input tax recovery

Input tax relating to an exempt supply is usually irrecoverable. In fact, a business only making exempt supplies is unable to register for VAT. A guide to partial exemption here. So input tax incurred on, say; purchase, refurbishment, legal costs etc would be lost if a property was sold or rented on an exempt basis. In order to recover this tax, it must relate to a taxable supply. If an OTT is taken, the sale or rent of the property will be standard rated which represents a taxable supply. VAT on supply = input tax claim.

Two-part process

The OTT is a two-part process.

The first part is a decision of the business to take the OTT and it is prudent to minute this in Board meeting minutes or similar. Once the decision to OTT is taken VAT may be added to a sale price or rent and a valid tax invoice must be raised.
The second part is to formally notify HMRC. If the OTT is straightforward the form on which this is done is a VAT1614A. Here. In some cases, it is necessary to obtain HMRC’s permission in which case separate forms are required. HMRC guidance here – para 5.

There can be problems in cases where the OTT is taken, but not formally notified.

Timing

It is vital to ensure that an OTT is made at the correct time. Even one day late may affect the VAT treatment. Generally speaking, the OTT must be made before any use of the property, eg; sale or rent. Care should also be taken with deposits which can trigger a tax point before completion.

Disadvantages

As mentioned above (and bears repeating) the benefit of taking the OTT is the ability to recover input tax which would otherwise fall to be irrecoverable. However, there are a number of potential disadvantages.

opting a commercial property may reduce its marketability. It is likely that entities which are unable to recover VAT would be less inclined to purchase or lease an opted property. These entities may be; partly exempt business, those not VAT registered, or charities/NFP organisations.
the payment of VAT by the purchaser may necessitate obtaining additional funding. This may create problems, especially if a VAT charge was not anticipated. Even though, via opting, the VAT charge is usually recoverable, it still has to be paid for up-front.
an OTT will increase the amount of SDLT payable when a property is sold. This is always an absolute cost.

Transfer of a Going Concern (TOGC)

I always say that advice should be taken in all property transactions and always in cases of a TOGC or a possible TOGC. This is doubly important where an opted building is being sold, because TOGC treatment only applies to a sale of property when specific tests are met. A TOGC is VAT free but any input tax incurred is recoverable, so this is usually a benefit for all parties.

Revoking an Option To Tax

The cooling off period – If an OTT has been made and the opter changes his/her mind within six months it can be revoked. This is as long as no tax has become chargeable on a supply of the land, that no TOGC has occurred, and the OTT has actually been notified to HMRC. There are additional considerations in certain cases, so these always need to be checked.
No interest has been held for more than six years – An OTT is revoked where the opter has not held an interest in the opted building for a continuous period of six years. The revocation is automatic, and no notification is required.
20 years – It is possible to revoke an OTT which was made more than 20 years ago. Certain conditions must be met, and advice should be taken on how such a revocation affects future input tax recovery.

Summary

Property transactions are high value and often complex. The cost of getting VAT wrong or overlooking it can be very swingeing indeed. I have also seen deals being aborted over VAT issues. Of course, if you get it wrong there are penalties to pay too. For these reasons, please seek VAT advice at an early stage of negotiations.

More on our land and property services here

VAT – Understanding land and property issues

By Marcus Ward 8 July 2024

Help!

Supplies relating to property may be, or have been; 20%, 17.5%, 15.%, 10% 5%, zero-rated, exempt, or outside the scope of VAT – all impacting, in different ways, upon the VAT position of a supplier and customer. In addition, the law permits certain exempt supplies to be changed to 20% without the agreement of the customer. As soon as a taxpayer is provided with a choice, there is a chance of making the wrong one! Even very slight differences in circumstances may result in a different and potentially unexpected VAT outcome, and it is an unfortunate fact of business life that VAT cannot be ignored.

Why is VAT important?

The fact that the rules are complex, ever-changing, and the amounts involved in property transactions are usually high means that there is an increased risk of making errors. This is increased by the fact that these are often one-off transactions by a business, and in-house, in depth tax knowledge is sometimes absent. Such activities can result in large penalties and interest payments, plus unwanted attentions from VAT inspectors. Uncertainty regarding VAT may affect budgets and an unforeseen VAT bill (and additional SDLT) may risk the profitability of a venture.

Problem areas

Certain transactions tend to create more VAT issues than others. These include;

whether a property sale can qualify as a VAT free Transfer Of a Going Concern (TOGC)
conversions of properties from commercial to residential use
whether to opt to tax (OTT) a commercial property
the recovery of VAT charged on a property purchase
supplies between landlord and tenants
the Capital Goods Scheme (CGS)
the anti-avoidance rules
mixed developments
apportionment of VAT rates
changes in number of dwellings in a building(s)
changes in intention of use of a building
sale of partially completed developments
partial exemption
charity use
non-business use
relevant residential use
the place of supply (POS) of services
holiday lets
serviced apartments
contracts
new build residential
DIY Housebuilders
tax points (time of supply)
HMRC queries
deposits
and even seemingly straightforward: VAT registration

Additionally, the VAT treatment of building services throws up its own set of VAT complications.

The above are just examples and the list is not exhaustive.

VAT Planning

The usual adage is “right tax, right time”. This, more often than not, means considering the VAT treatment of a transaction well in advance of that transaction taking place. Unfortunately, with VAT there is usually very little planning that can be done after the event. For peace of mind a consultation with a VAT adviser can steer you through the complexities and, if there are issues, to minimise the impact of VAT on a project. Assistance of a VAT adviser is usually crucial if there are any disputes with VAT inspectors. Experience insists that this is an area which HMRC have raised significant revenue from penalties and interest where taxpayers get it wrong.

Don’t leave it to chance!

For more information, please see our Land & Property services

VAT: DIY Housebuilder Scheme updated

By Marcus Ward 16 April 2024

HMRC has updated its guidance for DIY Housebuilders.

The scheme enables people who build, or convert properties into dwellings for their own use to recover VAT incurred on the project.

VAT: Land related services

By Marcus Ward 21 August 2023

Whether a service is “related to land” is important because there are distinct rules for this type of supply compared to the General Rule. The place of supply (POS) of land related services is where the land is located, regardless of where the supplier or recipient belong.

The rule applies only to services which relate directly to a specific site of land. This means a service where the land is a central and essential part of the service or where the service is intended to legally or physically alter a property.

It does not apply if a supply of services has only an indirect connection with land, or if the land related service is only an incidental component of a more comprehensive supply of services.

What is land?

For the purpose of determining the POS, land (also called immoveable property in legislation) means:

a specific part of the earth, on, above or below its surface
a building or structure fixed to, or in, the ground above or below sea level which cannot be easily dismantled or moved
an item making up part of a building without which it is incomplete (such as doors, windows, roofs, staircases and lifts)
items of equipment or machinery permanently installed in a building which cannot be moved without destroying or altering the building

What services directly relate to land?

HMRC provide the following examples:

construction or demolition of a building or permanent structure
surveying and assessing property
valuing property
providing accommodation in hotels, holiday camps, camping sites or timeshare accommodation
maintenance, renovation and repair of a building
property management services carried out on behalf of the owner
arranging the sale or lease of land or property
drawing up of plans for a building or part of a building designated for a particular site
services relating to the obtaining of planning consent for a specific site
on-site security services
agricultural work on land
installation and assembly of machines which, when installed, will form a fixture of the property that cannot be easily dismantled or moved
the granting of rights to use all or part of a property (such as fishing or hunting rights and access to airport lounges)
legal services such as conveyancing and drawing up of contracts of sale or leases, including title searches and other due diligence on a specific property
bridge or tunnel toll fees
the supply of space for the use of advertising billboards
the supply of plant and equipment together with an operator
the supply of specific stand space at an exhibition or fair without any related services

What services are only indirectly related to land?

The following HMRC examples are not deemed to be land related services:

management of a property investment portfolio
drawing up of plans for a building that do not relate to a particular site
arranging the supply of hotel accommodation or similar services
installation, assembly, repair or maintenance of machines or equipment which are not, and do not become, part of the building
accountancy or tax advice, even when that relates to tax on rental income
the supply of storage of goods in property without a right to a specific area for the exclusive use of the customer
advertising services including those that involve the use of a billboard
marketing, photography and public relations
the supply of equipment with an operator, where it can be shown that the supplier has no responsibility for the performance of the work
general legal advice on contractual terms
legal services connected with fund raising for property acquisitions or in connection with the sale of shares in a company or units in a unit trust which owns land
stand space at an exhibition or conference when supplied as part of a package with related services, eg; design, security, power, telecommunications, etc.

These examples are mainly derived from case law and the department’s understanding of the legislation and they are not exhaustive.

The Reverse Charge

If an overseas supplier provides land related services in GB, the POS is GB and the reverse charge applies if the recipient is GB VAT registered.

If a GB supplier provides services directly related to land where the land is located outside GB, the POS is not GB. This means that there is a supply in another country. VAT rules in different countries vary (even across the EU) – some countries use the reverse charge mechanism, but others require the GB supplier to VAT register in the country of the POS (where the land is physically located).

VAT: Partial exemption de minimis relief

By Marcus Ward 17 October 2022

VAT Basics

The VAT a business incurs on running costs is called input tax. For most businesses this is reclaimed on VAT returns from HMRC if it relates to standard rated, reduced rated, zero rated or certain outside the scope sales that a business makes.

However, a business which makes exempt sales may not be in a position to recover all of the input tax which it incurred. This is because input tax which relates to exempt supplies is generally irrecoverable.

This may affect any business which is involved in:

Property letting and sales – generally all types of supply of land
Financial services
Insurance
Betting, gaming and lotteries
Education
Health and welfare
Sport, sports competitions and physical education
Cultural services

(This list is not exhaustive)

A business in this position is called partly exempt. (If a business is fully exempt, it can neither VAT register nor recover any VAT at all). Input tax which directly relates to exempt supplies is irrecoverable. In addition, an element of that business’ general overheads, eg; light, heat, telephone, computers, professional fees, etc are deemed to be, in part, attributable to exempt supplies and a calculation must be performed to establish the element which falls to be irrecoverable. Such apportionment is called a partial exemption standard method. There are a number of alternative methods that may be used (so called “special methods”) but these must be agreed with HMRC.

De Minimis

There is, however, a relief available for a business in the form of de minimis limits. Broadly, if the total of the irrecoverable directly attributable (to exempt suppliers) and the element of overhead input tax which has been established using a partial exemption method falls below de minimis, all of that input tax may be recovered in the normal way.

The de minimis limit is currently £7,500 per annum of input tax. As a result, after carrying out the partial exemption method should the result fall below £7,500 and half of the total input tax for a year it is recoverable in full. This calculation is required on a quarterly basis (for businesses which render returns on a quarterly basis) with a review of the year, called an annual adjustment carried out at the end of a business’ partial exemption year. The quarterly