VAT treatment of land intended for the construction of new social housing

Question 1

Summary

Accepted Answer

Subject of this consultation

This consultation looks at the VAT treatment of land intended for the construction of new social housing.

Scope of this consultation

This consultation document sets out a specific series of questions about the scope and administration of a new VAT relief. These can be found in a collated form in Section 4. The government would be grateful if respondents could answer these questions directly. Respondents should not feel limited to only these questions when providing views, and we will also consider written submissions on other aspects relevant to the policy design and impacts.

Who should read this

The government welcomes contributions from any individual or organisation with an interest in this topic across the UK. This includes, but is not limited to, social housing providers, housing developers, landowners, constructors, tax agents and representative bodies.

Duration

The consultation will run for 8 weeks from 23 June 2026 to 18 August 2026.

Lead official

This is a joint consultation between His Majesty’s Treasury (HM Treasury) and HM Revenue and Customs (HMRC). The lead officials for HMRC are Lisa Allen, David Fitzgerald and Ishrat Ali. The lead official for HM Treasury is Dan Kirby-Murray. All can be contacted at the email address below.

How to respond or enquire about this consultation

Responses to this consultation should be submitted by 17 August 2026 via online form, by email to vatlandforsocialhousingconsultation@hmrc.gov.uk, or by post to:

VAT and Excise Team
HM Treasury
1 Horse Guards Road
SW1A 2HQ

Additional ways to be involved

The government intends to use responses to this consultation to inform further policy development. In line with the tax policy making process, a formal response to the consultation and next steps will be published in due course.

Previous engagement

HMRC and HMT have met with several interested stakeholders from January to March including devolved administrations to help shape the consultation and ensure the questions asked are focussed on the right areas.

Question 2

Foreword

Accepted Answer

Social housing plays a vital role in providing long-term, secure accommodation for some of the country’s most vulnerable households and low-income families, as well as for key workers who are essential to the functioning of our economy and public services.

More widely, meeting the government’s ambition to deliver 1.5 million new homes over the course of this Parliament will require more land to be brought forward, more quickly, in the places where demand is greatest.

Housing associations, developers and other groups critical to the delivery of social housing have suggested the government could go further to ensure the VAT treatment of land better supports the way social housing is delivered. In particular, the government has heard that targeted changes to the existing zero rate of VAT for new homes have the potential to increase the speed at which new social homes are built.

The government is therefore consulting on the introduction of a new zero rate of VAT for the sale of land intended for the construction of social housing. Any relief will need to be targeted, effective and fiscally responsible. That means designing rules that will genuinely support social housing delivery whilst protecting vital tax revenues and minimising the scope for abuse.

Through this consultation the government is seeking evidence on how the current VAT rules affect the feasibility and timing of social housing developments, and how the introduction of a new zero rate on the sale of bare land intended for social housing development might influence behaviour across the sector. The government is also seeking comments on the design of the proposed relief to inform the final design of the policy.

I thank you in advance for your engagement on this consultation.

Dan Tomlinson MP

Question 3

1. Introduction

Accepted Answer

At Budget 2025, the government committed to consulting on a new VAT relief for the sale of land on which social housing will be built. This is intended to simplify and accelerate the construction of social housing by removing an unfavourable VAT position when taking title of the land at an earlier stage in the development cycle.

This consultation forms part of the government’s wider strategy to increase housing supply and support the delivery of 1.5 million new homes over the course of this Parliament.

As part of a 5-step plan, the government is delivering a significant boost to grant funding through the £39 billion Social and Affordable Homes Programme. More details on the plan is available on GOV.UK.

A targeted VAT relief is intended to support the ability of housing associations and councils to more effectively use funding to invest in new homes.

Key objectives

The purpose of this consultation is to gather views on how the current VAT framework for land, property and construction operates in practice, with a particular focus on where it creates barriers for delivering social housing. We are also interested in views on how a new VAT zero rate for the sale of land intended to be used for the construction of social housing could remove those barriers. VAT is a reserved tax, and the government intends for this relief to apply UK-wide.

Some social housing developers have informed the government that the current VAT reliefs can negatively influence the timing of when registered housing providers take title to land. Taking title of the land is a critical point in accessing the largest tranche of grant funding for social housing construction.

As part of this consultation, the government seeks to understand the different types of operating models used by social housing developers and registered social housing providers. This information will then influence the design of any new VAT relief for the sale of land intended for the construction of social housing.

Chapter 2 seeks information on respondents to the consultation and their experience in the construction of social housing.

Chapter 3 looks at the current VAT treatment of land and construction of new builds and the ‘golden brick’ rules.

Chapter 4 invites views on the government’s proposed scope and consideration for a new relief.

Chapter 5 looks at the administration of the relief and possible safeguards against misuse.

Question 4

2. About you

Accepted Answer

This section seeks information on respondents to the consultation and their experience in the construction of social housing.

Question 1: Are you responding as:

a landowner
a developer
a social housing provider
another type of organisation — please provide details (for example, a trade or representative body, charity, another type of business or organisation)
a tax advisor
an individual

Question 2: If you answered ‘landlord’, ‘developer’, ‘social housing provider’ or ‘another type of organisation’ please provide the following details of:

the size of your organisation, for example, turnover and number of employees
where are you established and where do you operate — across the UK, in England, Scotland, Wales or Northern Ireland?
what are your organisation’s priorities when considering VAT implications in land acquisition and development?
please explain your operating model: (for example, what is your role in the process of constructing or developing social housing, please explain your partnerships with other organisations)
how do you currently structure your organisation’s operations to comply with VAT rules on land, property and construction?

Question 3: If you answered ‘social housing provider’ please provide the following details:

whether you are a registered provider of social housing, meaning officially recognised and registered with the Social Housing Regulator in England, Welsh ministers, the Scottish Housing Regulator or The Department for Communities in Northern Ireland?
what is your main source of funding for constructing new social housing and when are you able to access it? We would be grateful for any further information on this point

Question 5

3. Overview of current VAT treatment

Accepted Answer

This chapter looks at the current VAT treatment of land, construction for new dwellings and the ‘golden brick’ rules. (‘golden brick’ is explained further down in this section)

The VAT rules that are concerned with the construction of social housing are those relating to:

land transactions
property transactions
construction of, and the first sale of a major interest in, new homes

These rules play an important role in shaping the housing market and incentivising the delivery of social housing.

Land transactions

Supplies of land and buildings are generally exempt from VAT. This means that sellers do not charge VAT on these supplies and cannot recover any VAT incurred on associated costs.

If a seller of land wishes to recover VAT incurred on associated costs, they can ‘opt to tax’ the sale of the land. By notifying HMRC of an option to tax, the seller charges VAT at the standard rate (20%) on the supply of the land and can then recover VAT incurred as they are making a taxable supply.

There are rules to disapply a seller’s option to tax where the land being sold is intended for use by a registered social housing provider for social housing and the recipient provides the landowner with a certificate to this effect. This returns the transaction to being exempt and not subject to 20% VAT.

Construction of and the first sale of a major interest in a new home

The construction and first sale of a major interest in a new residential dwelling benefits from a zero rate of VAT. A major interest for these purposes is defined as either the sale of the freehold or long lease in the dwelling.

Supplies made in the course of construction of a building for a residential or charitable purpose, or the supply of a building to a relevant housing association, may also be treated as zero rated for VAT purposes providing certain criteria are met.

A zero rate results in no VAT being charged, but unlike an exemption, VAT incurred on making such supplies (for example, conveyancing or legal fees) can be recovered as input tax by the seller.

Zero rating only applies to the sale of a dwelling once a dwelling has been constructed above foundation level; this is sometimes referred to as ‘golden brick’. This term denotes the point at which HMRC determines that enough work has been completed on a piece of land for it to constitute a dwelling for VAT purposes.

It is only at this stage that developers or landowners can begin to recover VAT incurred in preparing the land for a future zero-rated sale if they have not opted to tax the land.

HMRC understand that currently a social housing development can, for both commercial and tax reasons, give rise to complex structures. A typical development involves 3 parties: the landowner, a developer/builder of social housing, and the social housing provider. The developer sources the land for building new homes and approaches a registered social housing provider to enter into a partnership or joint venture. Once an agreement is reached, development can begin. The developer will construct to above foundation level (the golden brick stage) before transferring title to the social housing provider to benefit from the construction zero rate.

All parties would benefit from a zero-rated transaction. The landowner would be able to recover VAT on their costs. The developer would not incur any additional costs building to golden brick. The social housing providers will not incur VAT that they would otherwise be unable to recover, because onward supplies will be exempt.

This is where current VAT rules cause issues. The earliest point a zero rate can apply is at the ‘golden brick’ stage. Reaching this stage incurs significant costs, up to 60% of the whole costs of the project. This may create cashflow impacts that can delay construction.

Developers have also noted that transactions on a ‘golden brick’ basis can be costly and time-consuming for developers as it requires monitoring of the site to ensure that each unit (house or block of flats) is ‘above foundation level’ before the title can be transferred to the social housing provider. They claim that these additional costs are passed on to the registered social housing provider.

Question 4: Does HMRC/the governments understanding accurately reflect your knowledge of what happens in practice?

Question 5: What is your assessment of how the current ‘golden brick’ rules create barriers of the construction of social housing?

Question 6: Are there specific areas where VAT rules on land have a greater impact on your activities?

Question 6

4. Policy design: objective and scope of the new relief

Accepted Answer

This chapter invites views on the government’s proposed scope and consideration for a new relief.

Objective

The government is of the view that introducing a zero rate for the sale of bare land planned for social housing would remove a barrier that is restricting the delivery of social housing and therefore support the government’s commitment to deliver 1.5 million new homes over this Parliament.

The key principles guiding the development of the new relief are as follows:

Ensuring VAT rules do not create barriers that slow or adversely impact social housing delivery
Delivering value for money for taxpayers
Minimising administrative burdens for businesses and HMRC
Reducing opportunities for misuse

VAT is the UK’s third largest tax and helps to fund public services, including the NHS, education, and defence. Therefore, any relief must be tightly focused to ensure that it achieves its objectives whilst minimising opportunities for abuse.

Scope of the new VAT relief:

The government proposes that a zero rate of VAT will be applied to bare land that will be used for the construction of social housing. The new relief will enable a relevant registered housing provider to purchase and take title of land that will be used for construction of social housing.

This would remove the need for social housing developers to build to the ‘golden brick’ stage, to qualify for the existing construction VAT relief, whilst still getting full recovery of VAT.

Currently, title transfer from the landowner to the relevant housing provider often only occurs at ‘golden brick’ stage. This leads to delays resulting in staggered transfers as each plot is built to ‘golden brick’ before the registered social housing provider takes title. The introduction of the new relief should bring forward the transfer of the title of the land and reduce the need for complex chain transactions, supporting faster delivery of social housing.

Question 7: What is your definition or understanding of the term ‘social housing’? (Please reference any statutory definitions that may be relevant including planning regulations and legislation.)

Question 8: How would a new relief reduce the complexities in the current system and incentivise your business’s ability to develop social housing quicker? (meaning accelerate the delivery of social housing to help achieve the government’s objective of building 1.5 million new homes)

Question 9: How would a new relief reduce administrative burdens for your business? (landowner, developer, social housing provider)

A clear and robust definition of registered social housing provider is essential to ensure that the new VAT relief is applied consistently and only to qualifying transactions. This provides certainty for businesses and HMRC, reduces administrative complexity and minimises the risk of misuse. Potentially aligning with existing statutory definitions also ensures coherence with other tax and regulatory frameworks.

The starting point is the existing definition in the VAT Act 1994, which reflects arrangements across the devolved governments. Under Schedule 8, Group 5, Note 21 of the VAT Act 1994, zero-rating currently applies to the conversion of non-residential buildings into dwellings or communal residential buildings by a “relevant housing association”.

A ‘relevant housing association’ is defined as a:

private registered provider of social housing (as defined by section 80 of the housing regeneration Act 2008)
registered social landlord within the meaning of part I of the Housing Act 1996 (Welsh registered social landlords)
registered social landlord within the meaning of the Housing (Scotland) Act 2001 (asp 10) (Scottish registered social landlords)
registered housing association within the meaning of part II of the Housing (Northern Ireland) Order 1992 (Northern Irish registered associations)

This definition can also be found in Schedule 10, Part 1, Item 10 of the VAT Act 1994. HMRC uses this definition to ensure that a housing association does not incur VAT on the purchase of land, which the owner has opted to tax, providing it certifies that it will be used as either a dwelling or for a relevant residential purpose.

Our current proposal is for the relief to only apply to providers who are registered with the relevant social housing regulator in their respective regional administration in line with existing VAT reliefs available. Limiting relief to registered providers ensures that only recognised, regulated entities benefit from the relief and limits opportunities for it to be misused by those not building social housing.

Question 10: What types of organisations do you consider provide social housing? (Please reference any regulation of bodies mentioned if relevant.)

Question 11: Are there any issues associated with limiting relief to registered providers? (Please provide any additional detail that you feel will be relevant.)

Question 12: Are there any unintended consequences or risks you foresee with the introduction of this new relief?

Question 13: How frequently do plans for the development of social housing change? When plans do change, in what way do they change?

Question 7

5. Administration of the relief

Accepted Answer

This chapter explores how the relief could be administered in practice and considers what safeguards may be necessary to protect against misuse, whilst keeping administrative burdens proportionate.

To apply a zero rate to the sale of land, HMRC will expect the seller to hold evidence that the land is being purchased by a registered social housing provider. HMRC will also need to consider what sanctions might be appropriate in cases where evidence later shows that the eligibility criteria have not been satisfied.

Business administration of the relief

Certification and evidence requirements

One approach could be to build on existing VAT certification processes where additional assurance is needed that the eligibility criteria has been satisfied. Certification could play an important role in ensuring the relief applies only to qualifying transactions and in reducing the risk of misuse. It may also provide clarity for both businesses and HMRC, while helping to manage compliance risks. Existing VAT certification models for VAT relief may offer useful precedents, although these may need to be adapted and supplemented to reflect the nature of this relief and safeguards needed.

Under existing VAT arrangements, a penalties regime applies to ensure that no advantage is obtained through the issue of an incorrect certificate. A similar approach could be considered here. For example, a registered provider who issues a certificate which later proves to be incorrect could be liable to a penalty charge.

Options for how relief is obtained

The intention of the policy will be for the zero-rate to apply when the land is purchased by a registered provider of social housing.

To help ensure that the relief is appropriately targeted, one option would be to require the relevant registered social housing provider to provide a certificate — potentially supported by some specified documentary evidence — to the landowner for the sale to be zero-rated. Under this approach, responsibility for the accuracy of the information provided would remain with the registered social housing provider.

HMRC assurance of the relief

HMRC will seek to limit opportunities for misuse and non-compliance, whilst ensuring the system remains workable in practice.

Under this model, responsibility for holding documentary evidence of entitlement to the relief will rest with the registered social housing provider. The landowner would not be expected to monitor how land is used after transfer of title. However, in line with normal VAT record keeping requirements, HMRC would expect the landowner to retain the certificate/evidence for inspection if required.

Options for further adjustment if intention changes

Responsibility for notifying HMRC of any relevant changes would remain with the registered social housing provider that issued the certificate.

Question 14: What evidence can be produced at the point the land is sold to demonstrate that it has been purchased by a registered social housing provider, and therefore qualify for the zero rate?

Question 15: Can you see any risks or complications with a declaration mechanism in the form of certification?

Question 16: Are there any unintended consequences or complications of mixed tenure developments? We are interested to understand more around practical or delivery concerns that you think may be relevant in this context

Question 17: What additional support or guidance would help your organisation navigate the new VAT relief?

Question 18: Are there any other changes that you think should be included to make the new relief easier for you to implement?

Question 8

6. Assessment of impacts

Accepted Answer

Exchequer Impact Assessment

Year	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
Exchequer impact (£m)	10	10	10	10	10	10

The Exchequer impact will be assessed in the light of consultation evidence and if a policy measure is taken forward then the estimated impact will be set out at the next fiscal event.

Summary of impacts

Impacts	Comment
Economic impact	The measure is expected to have positive impact in supporting delivery of social housing, by reducing cashflow constraints associated with land acquisition. Earlier transfer of land title may accelerate construction timelines. No wider macroeconomic impacts are anticipated at this stage.
Impact on individuals, households and families	The measure is not expected to have a direct impact on individuals’ tax liabilities. Indirectly, supporting the delivery of social housing may contribute to improved housing availability for households in need. No negative impacts on households or families have been identified.
Equalities impacts	The measure applies to organisations rather than individuals and does not differentiate on the basis of protected characteristics. No adverse equality impacts have been identified at this stage.
Impact on businesses and Civil Society Organisations	The measure would primarily affect landowners, developers and registered providers of social housing. Registered providers are expected to benefit from reduced irrecoverable VAT and lower administrative complexity when acquiring land prior to construction. Developers may benefit from improved cashflow and reduced reliance on ‘golden brick’. Landowners may face additional certification requirements, which are expected to be proportionate and aligned with existing VAT processes.
Impact on HMRC or other public sector delivery organisations	The measure would require updates to HMRC guidance and some additional assurance activity to support certification and compliance. These impacts are expected to be manageable within existing operational frameworks and will be considered further as policy design develops.
Other impacts	The introduction of a new zero rate creates potential risks of misuse if land is not sold to a registered social housing provider. The consultation therefore seeks views on certification, evidence requirements and potential sanctions to mitigate misuse and ensure the relief is appropriately targeted.

Question 9

7. Summary of consultation questions

Accepted Answer

Question 1: Are you responding as:

a landowner
a developer
a social housing provider
another type of organisation — please provide details (for example, a trade or representative body, charity, another type of business or organisation)
a tax advisor
an individual

Question 2: If you answered ‘landlord’, ‘developer’, ‘social housing provider’ or ‘another type of organisation’ please provide the following details of:

the size of your organisation, for example, turnover and number of employees
where are you established and where do you operate — across the UK, in England, Scotland, Wales or Northern Ireland?
what are your organisation’s priorities when considering VAT implications in land acquisition and development?
please explain your operating model: (for example, what is your role in the process of constructing or developing social housing, please explain your partnerships with other organisations)
how do you currently structure your organisation’s operations to comply with VAT rules on land, property and construction?

Question 3: If you answered ‘social housing provider’ please provide the following details:

whether you are a registered provider of social housing, meaning officially recognised and registered with the Social Housing Regulator in England, Welsh ministers, the Scottish Housing Regulator or The Department for Communities in Northern Ireland?
what is your main source of funding for constructing new social housing and when are you able to access it? We would be grateful for any further information on this point