HM Revenue and Customs Brief 64/07
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Issued 17 October 2007
VAT: Changes in the VAT treatment of serviced building plots
HMRC is announcing a change in the liability treatment of serviced building
A serviced building plot is bare land in respect of which civil engineering
works have been carried out to provide access to essential services such as gas,
electricity, water, main drainage, street lighting and sewerage. Until now, we
have treated the supply of a serviced building plot by the landowner to a
developer as consisting of two supplies - an exempt supply of land and a
standard-rated supply of civil engineering.
A recent VAT Tribunal decision in Douglas Virtue & Sonia Virtue T/A
Lammermuir Game Services [V20259] held that the sale of a ‘plot of land within a
serviced site’ (the Tribunal’s description, in preference to
the term serviced plot) constituted a single exempt supply of
The Tribunal also held that, in this case, the supply of the civil
engineering works to the landowner was zero-rated because it had been made in
the course of the construction of a ‘building designed as a dwelling’.
The supply of civil engineering works is normally standard-rated.
We now accept that, with immediate effect, the supply of a serviced building
plot of land is a single exempt supply of land by the landowner.
The supply of civil engineering works to the landowner to provide access to
essential services will continue to be standard–rated in most cases. However,
where the landowner can demonstrate that these services are being received in
the course of construction of a building designed as dwellings, or buildings
intended for use solely for a relevant residential or a relevant charitable
purpose, they can be zero-rated.
We would normally expect all the following to be met to demonstrate that
zero-rating is appropriate:
- the landowner holds sufficient planning consent to demonstrate that the
civil engineering works were received in the course of construction of a
building designed as dwellings, or buildings intended for use solely for a
relevant residential or a relevant charitable purpose
- the civil engineering is closely connected with or facilitates the
construction of buildings; and
- the construction of the buildings will follow on closely after the
completion of the civil engineering works.
The extent to which the above conditions have been met will be a matter of
fact and degree. We would need to be satisfied that at the time the civil
engineering is supplied, any potential purchaser of a serviced plot can only
construct a qualifying building on the plot. In addition, it must be clear that
the landowner has a firm intention to sell the serviced plots once the civil
engineering is complete and that any purchaser is ready to begin actual
construction of the buildings as soon as possible.
Impact on landowners, commercial housebuilders and DIY housebuilders
Prior to this finding by the Tribunal:
- landowners would incur VAT on the civil engineering works carried out and,
if they were registered for VAT, were able to take credit for this VAT as
input tax against the output tax due on the onward supply of the civil
engineering to the purchasers of the serviced plots
- if the purchasers of the serviced plots were commercial developers, the
VAT on the civil engineering element would be recoverable to the extent that a
taxable supply would be made of the completed buildings
- if the purchasers of the serviced plots were DIY housebuilders, the VAT on
the civil engineering element could not be recovered through the DIY
Housebuilders’ VAT Refund Scheme.
New policy following the finding by the Tribunal:
- landowners will now be making an exempt supply of land and will not be
able to register for VAT unless they have other taxable activities
- if the supply of the civil engineering works to them is standard-rated,
they will not be able to recover this VAT and it will become a cost to the
- developers and DIY housebuilders will now not be charged VAT by landowners
in this situation.
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Article Published/Sorted/Amended on Scopulus 2007-10-18 23:55:25 in Tax Articles