The Office of Tax Simplification (OTS) VAT review was published in 2017 and included recommendations for the simplification of the VAT treatment of land and property. On 23 March 2021 the government announced the launch of a call for evidence to look at potential options and ideas to simplify the land and property VAT exemptions.

Whilst it is important that businesses comply with their tax obligations, HMRC acknowledges the complexity of the existing VAT rules on land and property and would like to hear views from businesses on the practical application of the current rules, and whether these rules could be simplified.

HMRC has published a call for evidence to seek opinions on the current VAT rules related to land and property. Businesses are invited to share their views on the simplification of these rules, both in response to the potential options presented in this document, and any new ideas that are not considered here.

This call for evidence is split into 2 sections:

1. the first section, looks at the history of the VAT land and property rules, highlighting how they have become increasingly complex over time. It considers factors that are driving the need for simplification
2. the second section, discusses possible solutions for the issues caused by the current complicated nature of the VAT rules for land and property.

CTG’s VAT technical group reviewed the implications of the consultation for charities and submitted a detailed response which can be read via the link below. We welcomed the proposal that the VAT treatment of land transactions be simplified and highlighted the complexities that charities often face. The response also highlighted the importance of protecting the Relevant Charitable Purpose (RCP) relief for new buildings.

Simplifying the VAT Land Exemption – CTG response (August 2021)

Summary of call for evidence questions

Chapter 2

1) What is your experience of the VAT rules on land and property?

2) Are there any supplies that are particularly difficult to establish the correct liability for, leading to financial and administrative burdens? Please explain.

3) Do you think that the land and property VAT rules require simplification? Please explain why.

Chapter 3.1

4) What are your views on the options presented in the OTS report outlined above? Do you agree with their assessment?

Chapter 3.2

5) What are the advantages and disadvantages of making all minor and short-term interests in land and property subject to VAT?

6) How should a minor and short-term interest be defined?

Chapter 3.3

7) What are your views on the option to make supplies of land and property subject to VAT apart from certain specified exceptions?

8) Which particular supplies of land and property should continue to be exempt from VAT if this option were to be considered further?

9) Are there any supplies that should be subject to VAT that are currently exempt or vice versa?

Chapter 3.4

10) What are your views of linking the VAT liability of interests in land to those recorded in Land Registers in England, Scotland, Wales and Northern Ireland?

11) What are the potential advantages and disadvantages of such an approach?

Chapter 3.5

12) Do you have any other suggestions on how the land and property VAT rules could be simplified?

13) Would you prefer to keep the VAT rules on land and property as they are? If so, please explain.