VAT: Land and Property

The VAT treatment of land and property can be complex, and mistakes can be costly due to the value of these transactions.

The sale of property can be difficult, with the VAT treatment depending on its nature. Landowners need to consider whether such sales should be subject to an option to tax or if sales are a VAT free transfer of a going concern.

In addition to selling land and property, the recovery of VAT incurred on the purchase of property can be challenging, as not all VAT is recoverable. Further, VAT recovery is provisional and dependent on how the property is to be used. If you are considering purchasing a property, you should seek advice to understand how future changes to the property’s use could impact VAT recovery.

Sub-contractors and contractors will need to consider whether it is appropriate to charge VAT, or whether VAT should be accounted for under the construction industry reverse charge rules.

Developers incurring costs need to determine whether the standard, lower or zero rates of VAT apply. If VAT is charged incorrectly by suppliers, HMRC can deny VAT recovery, meaning financial loss for customers.

Trading businesses buying premises for themselves or for their pension schemes may not be aware that complex VAT rules apply.

We can help with specific areas, including the following:

  • When sales of properties are subject to VAT
  • Whether the option to tax is appropriate and the process of notifying HMRC
  • When construction works are subject to the zero-rate of VAT
  • When conversion works are subject to the lower rate of VAT
  • When sales of properties can be treated as a VAT free transfer of a going concern
  • The risks for land and property as part of a business re-organisation
  • The risk areas where VAT recovery is provisional

If you need any advice in respect of VAT and land and property, contact our VAT team.

Meet the team:

General Practice and VAT Manager