Sale of commercial land disapplication of VAT

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I have a client " a small corporate developer" who is in the process of buying land that had been opted to tax and intends to build a house for eventual sale on it as "dwellings".

I believe the option to tax should be disapplied but i cant seem to find the correct reference, i have looked at Opting to tax land and buildings (VAT Notice 742A) which only covers land sold to an individual and not for business purposes below:

"Your option to tax will not apply if you supply land to someone who intends to build a dwelling on it for their own use, and not in the course or furtherance of any business carried on by them (no certificate is required). This includes cases where the buyer intends to engage a builder to carry out the construction work on his behalf."

Replies (6)

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paddle steamer
By DJKL
20th Nov 2023 15:41

Register purchaser for vat and CIS as a housebuilder, reclaim input tax on land purchase, reclaim input vat on materials/labour/ prof fees etc, zero rate sale of finished dwelling - be sure client does not want to change mind and retain finished dwelling rather than sell it.

(Purchaser does not Opt to tax so will need to fund vat cost(monthly returns a good idea re cashflow, and LBTT/SDLT will be on gross)

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Replying to DJKL:
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By Jupiter Accountants
20th Nov 2023 17:15

thank you.

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By Ruddles
20th Nov 2023 15:54

Are you (OP) perhaps confusing your situation above with the disapplication of the option on eg sale of commercial building which is to be converted into residential?

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Replying to Ruddles:
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By Jupiter Accountants
20th Nov 2023 16:33

Perhaps, but i thought that a "disapplication of the option to tax may apply in circumstances where the property is intended to be designed or adapted, and/or is intended for use as a dwelling" included land.

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Replying to Jupiter Accountants:
paddle steamer
By DJKL
20th Nov 2023 17:10

Disapplications are not painless, they need advised before price agreed and if I am the seller I will likely adjust price at which I am willing to sell when made aware of purchaser's intent- there is no free lunch.

In your case your client is acting as a builder, he/she just reclaims the vat and zero rates the sale later. (provided he/she sticks to plan- client must be advised this route does not readily allow variation of intent/execution)

The dangers are always client changing their mind so as vat can be chunky paid advice on the vat is very worthwhile (whilst I know the very basics I always pay someone who we can sue if they F it)

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Replying to Jupiter Accountants:
By Ruddles
20th Nov 2023 17:21

"Land" includes buildings but "buildings" does not include land. As you have already identified, the disapplication in respect of land is limited to specifically defined circumstances.

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