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HMRC internal manual

VAT Time of supply

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HM Revenue & Customs
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Tax points for specific types of supply: land and property: freehold supplies

A supply of the freehold in land is treated for VAT purposes as a supply of goods by virtue of paragraph 4 of Schedule 4 to the VAT Act 1994. It follows that such supplies are subject to the normal time of supply rules as they apply to goods.

Since land cannot be removed, the basic tax point is when the freehold is made available to the purchaser. This occurs at the time of legal completion which is the point at which the freehold is conveyed to the purchaser. The equivalent under Scottish land law is the time of delivery of the disposition, which is known as the settlement date.

On occasion a prospective purchaser may be allowed to enter the property in advance of completion. This can occur where, for example, the purchaser needs to carry out preliminary works or testing on the site. It does not advance the basic tax point for the sale of the freehold. This is because the right to enter the site earlier than would otherwise be the case, represents an additional, but separate, supply in the form of a right of access. In time of supply terms, the exercise of the rights arising from this further supply are unconnected with the eventual making available of the freehold.

This was confirmed in the case of Cumbernauld Development Corporation([2002] STC 226) involved a supply of land in Scotland. The Corporation supplied a new club house and some surrounding land to Dullatur Golf Club. The club was permitted to take over the premises in advance of the delivery of the disposition. The Court of Session rejected the Corporation’s claim that this also advanced the basic tax point.

As with any supply of goods for which there is a basic tax point, this is subject to the creation of an actual tax point by the issue of a VAT invoice in advance, or within 14 days, of the basic tax point. An actual tax point can also be created by the receipt of a payment in advance of the basic tax. In practice payment, either in full or of the balance of the purchase price, occurs immediately prior to, or simultaneously with, completion.