Introduction: background: history of the land exemption
Until 31 March 1989 most property transactions were exempt from VAT or zero rated. On 21 June 1988 the ECJ ruled that some of the UK zero rates were unlawful because they did not benefit the final consumer or follow a clearly defined social policy. This ruling necessitated major changes to the UK legislation.
With effect from 1 April 1989, the construction and freehold sale of new commercial buildings and civil engineering works became standard rated and long lets of new commercial buildings became exempt (all of these supplies were previously zero rated). As a result of these changes, many landlords who granted long leases incurred irrecoverable input tax on construction or freehold purchase. In order to mitigate the effect on the industry the option to tax was introduced on 1 August 1989.
You can find a summary of the changes since 1 April 1989 at section 25.