01 Dec 2021

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 12 May 2021 the HMRC published a call for evidence to look at potential options and ideas to simplify the land and property VAT exemptions. The call for evidence ran until 3 August 2021. 

The call for evidence was split into 2 sections:

  • Chapter 2 looked at the history of the VAT land and property rules, highlighting how they have become increasingly complex over time. It considered factors that are driving the need for simplification.
  • Chapter 3 discussed possible solutions for the issues caused by the current complicated nature of the VAT rules for land and property.

On 30 November HMRC published a summary of responses to the call for evidence. After analysing the responses the Government does not intend to take any further action regarding any of the potential options previously discounted by the OTS. The Government agrees with the OTS and respondents that these options would likely be ineffective in reducing complexity overall. However, the Government has set up a working group with members of the Land and Property Liaison Group with the aim of producing guidance for HMRC compliance officers that will provide certainty for businesses. This will include guidance on dilapidations, overages, call options and rights of light. Also, there will be ongoing engagement with stakeholders on proposed changes to the VAT rules and their implications.


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Chris Hewitt

Tax Advisor, AREF