Tax

Simplifying the VAT land exemption – Law Society response

The proposals

The HM Revenue & Customs' (HMRC) call for evidence asks for views on how the land and property VAT rules currently work, including any difficulties. It also asks whether the rules require simplification.

The consultation puts forward and seeks views on possible options for change, including:

  • removing the seller's ability to opt to tax, and
  • making all relevant transactions either exempt or taxable at a reduced rate or standard rate

Our view

We favour considering changes where there are specific areas of concern before focusing on whether more wholesale changes are needed.

In our response, we’ve identified such specific areas for attention.

We put the case particularly against some of the more potentially disruptive proposed options, such as:

  • the idea of making all land transactions exempt, or
  • making all land supplies taxable

Instead, we note the possibility of making supplies of commercial property taxable but with an option to exempt. We think this option is more attractive, and one to explore further.

Depending on the outcome of other aspects of the call for evidence, we also recommend the creation of a publicly available and searchable register of options to tax. This could be accompanied by a searchable register of entities that are VAT registered and go beyond the functionality of the current VAT number check facility.

What this means for solicitors

Solicitors who advise on land and property taxation are likely to be interested in the development of law and policy in this area.

Next steps

HMRC describes this as an open call for evidence.

Its purpose is to seek views on policy design in this area, and any suitable alternatives.

HMRC will then consult at a later date on a specific proposal for reform.

Read the consultation on the GOV.UK website