A serviced building plot is a plot of land on which the civil engineering works have been carried out in order to facilitate construction. As such, the plot has electricity, water, sewerage and drainage and, if applicable, lighting and/or gas available to it.
In the past, a supply of such a plot has been treated as two supplies for VAT purposes – a supply of the land (exempt from VAT) and a supply of the civil engineering services (standard-rated for VAT purposes).
Following the Tribunal decision, HMRC now accept that there is only a single exempt supply of land in such cases.
This in turn means that where civil engineering services are supplied to a landowner, these should be zero-rated when being made in the course of the construction of a building designed as a dwelling, or buildings intended for use solely for a relevant residential or a relevant charitable purpose. For this to apply, HMRC expect that:
• the landowner holds sufficient planning consent to demonstrate that the civil engineering works were carried out in the course of construction of a building designed as dwellings, or buildings intended for use solely for a relevant residential or a relevant charitable purpose;
• the civil engineering is closely connected with or facilitates the construction of buildings; and
• the construction of the buildings will follow on closely after the completion of the civil engineering works.
The ruling will affect developers of properties of various kinds, including DIY house builders.