VAT on land

What is VAT? 

Valued Added Tax or VAT is a tax paid on the sale of goods and services. Traders who have a turnover in excess of £85,000 must register, others can register voluntarily. 

Once registered, traders must add 20% VAT on the goods and/or services they provide, and they will also be able to recover the VAT on the products that they acquire. 

Are all goods taxable? 

Some goods and services are exempt from VAT: for example, insurance, finance and credit, education and training, fundraising events by charities, subscriptions to membership organisations. Also, food and drink for human and animal consumption are usually zero-rated.  

Is land exempt from VAT?

Suppliers of land and buildings, such as sales, leasing or renting, are also normally exempt from VAT. As seen above, this means that no VAT is payable, but the supplier cannot recover the VAT incurred on their expenses. 

But you can opt to add VAT to land. For the purposes of VAT, “land” includes not only the land itself, but any buildings or structures permanently affixed to it. There are, however, some exceptions, e.g., residential properties, land sold for construction of dwellings or buildings sold to be converted into residential properties, and buildings used for a relevant charitable purpose. 

In compulsory purchase… 

In case your land is compulsory purchased, and if you have not opted to tax, you will be exempt from VAT; but if you have opted to tax, you are making a supply for VAT purposes. Therefore, it is necessary that you negotiate the figure with added VAT, as later you will need to pay the VAT sum to HMRC as output tax. 

If at the time of supply, you don’t know how much you will receive, each payment made to you by the purchaser will have a different tax point; that is, either the date when payment is received, or each time you issue a VAT invoice in respect of such payment; the tax point will be the earlier of the two. 

If you have a question concerning VAT on land, please do not hesitate to contact us >