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HMRC internal manual

VAT Land and Property

Option to tax: supplies not affected by an option: land sold to a relevant housing association

The conditions for disapplication of an option to tax for land sold to a housing association are explained in paragraph 3.6, Notice 742A Opting to tax land and buildings.

It is common for a builder to sell land to a housing association and at the same time enter into a design and build contract for the construction of dwellings on that site. In these circumstances, there are two separate supplies: one of land (exempt, subject to option to tax which may be disapplied); and one of construction services (zero rated). Where, prior to making the grant of the land, the vendor has started constructing the dwellings and makes the first grant of a major interest in partly completed dwellings, the supply would become zero rated. Please see VCONST for further guidance.