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HMRC internal manual

VAT Time of supply

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HM Revenue & Customs
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Legislation: UK secondary law (VAT Regulations 1995): Regulation 84 supplies of land (special cases)

Law

84(1) Where by or under any enactment an interest in, or right over, land is compulsorily purchased and, at the time determined in accordance with section 6(2) or (3) of the Act, the person (the grantor) from whom it is purchased does not know the amount of payment that he is to receive in respect of the purchase then goods or, as the case may require, services shall be treated as supplied each time the grantor receives any payment for the purchase.

(2) Subject to paragraphs (3) to (5) below, where a person (the grantor) grants or assigns the fee simple in any land, and at the time of the grant or assignment, the total consideration for it is not determinable, then goods shall be treated as separately and successively supplied at the following times -

(a) the time determined in accordance with section 6(2), (4), (5), (6), (9) or (10) the Act, as the case may require, and

(b) the earlier of the following times -

(i) each time that any part of the consideration which was not determinable at time mentioned in sub-paragraph (a) above is received by the grantor, or

(ii) each time that the grantor issues a VAT invoice in respect of such a part.

(3) Paragraph (2) above shall not apply in relation to a grant or assignment falling within item 1(a) of Group 1 of Schedule 9 to the Act where any of the persons specified in paragraph (4) below intend or expect to occupy the land on a date before a date ten years after completion of the building or civil engineering work on the land, without being in occupation of it wholly or mainly for eligible purposes.

(4) The persons referred to in paragraph (3) above are -

(a) the grantor;

(b) any person who, with the intention or in the expectation that occupation of the land on a date before a date ten years after completion of the building or civil engineering work would not be wholly or mainly for eligible purposes -

(i) provides finance for the grantor’s development of the land, or

(ii) has entered into any agreement arrangement or understanding (whether or not legally enforceable) to provide finance for the grantor’s development of the land;

(c) any person who is connected with any person of a description within sub-paragraph (a) or (b) above.

(5) For the purposes of this regulation -

(a)Note (2) to Group 1 of Schedule 9 to the Act shall apply in determining when a building or civil engineering work is completed;

(b) paragraph 3A(8) to (13) of Schedule 10 to the Act shall have effect for determining the meaning of “eligible purposes” and “occupation”;

(c) “the grantor’s development of the land” means any acquisition by the grantor of an interest in the land, building or civil engineering work and includes the construction of the building or civil engineering work;

(d) “providing finance” has the same meaning as in paragraph 3A(4) of Schedule 10 to the Act, subject to any appropriate modifications, but does not include paying the consideration for the grantor’s grant or assignment within paragraph (3) above;

(e) any question whether one person is connected with another shall be determined in accordance with section 839 of the Income and Corporation Taxes Act 1988.

Commentary

Regulation 84 covers two different sets of circumstances involving transfers of land.

Regulation 84(1) land subject to compulsory purchase.

This covers compulsory purchases of land. It only applies where, in the course of a compulsory purchase, title in the land passes to the purchasing body before the amount that is to be paid to the owner is agreed. The normal tax point rules apply in all cases where transfer of title does not occur until after the purchase price has been agreed.

Regulation 84(2)-(5) contingent or conditional purchase price

This part of the regulation applies to freehold supplies of land where some, or all, of the purchase price is conditional or contingent on some later event. For example, an agreement might provide for an additional payment to become due in the event, say, of the new owner obtaining planning permission to develop the land. Similarly the final price payable may be based on the profit made by the new owner in developing the land. The regulation 84(2) tax point applies to the contingent element of the purchase price. Paragraphs (3)-(5) are anti-avoidance measures to prevent exploitation of the delayed tax point.

For further information about either of these provisions see VATTOS9350.