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HMRC internal manual

VAT Land and Property

HM Revenue & Customs
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New, and partly completed, buildings and civil engineering works (Item 1(a)): supplies of land which include new civil engineering works

Where the land is primarily a new or partly completed civil engineering work, the freehold sale will be a single standard rated supply. This is so where the aim of the transaction is not to acquire the land but rather the new or partly completed civil engineering work on or under the land, such as an airfield or oil refinery.

On the other hand, where the new or part completed civil engineering works is only a minor element of the land, the supply is treated as a single exempt supply of land (subject to the option to tax). An example of such a supply is the supply of a ‘serviced building plot’, where the vendor has installed the infrastructure for the provision of utilities (water, power, sewerage, etc.).

The decision in Douglas Virtue t/a Lammermuir Game Services (VTD 20259) confirmed that the sale of ‘serviced building plots’ should be treated this way. In that case, HMRC had decided that the sale of serviced housing plots to DIY housebuilders were mixed supplies of exempt land and standard-rated supplies of civil engineering works. The taxpayer appealed against this decision and the Tribunal upheld the appeal and held that the sale of a ‘plot of land within a serviced site’ constituted a single exempt supply of land.

The Tribunal also held that, in this case, the supply of the civil engineering works to the landowner was zero-rated because it had been made in the course of the construction of a ‘building designed as a dwelling’.