The government opened a consultation to seek views on the introduction of a new zero rate of VAT for the sale of land intended for the construction of social housing. This change would enable relevant registered housing providers to purchase and take title of bare land to be used for the construction of social housing, without having to wait for the “golden brick” stage when zero-rating currently applies.

In its response to the consultation, ICAEW said it supported the introduction of a well-designed and targeted VAT relief for land acquired for the construction of new social housing.

Ed Saltmarsh, ICAEW Tax Technical Manager, said: “We support these proposals, which mean developers won’t need to wait until the golden brick stage to transfer property to social housing providers. The current system can result in cash flow issues, delays to grant funding and additional costs, which are ultimately borne by the social housing provider.

“A well-designed relief would remove frictions without significantly altering the underlying policy framework.

“However, this change isn’t a silver bullet. Our members’ experience is that the golden brick approach is a source of cost, friction and delay rather than a barrier to delivery. Although the relief is worth pursuing to remove real and quantifiable friction, we caution that the measure will not, by itself, materially increase housing supply.”

The Institute said that any new relief should minimise compliance burdens for businesses and HMRC by, for example, building on existing VAT concepts and certification mechanisms wherever possible. It added the relief should operate consistently across all four nations of the UK.

ICAEW added that any new relief should apply to qualifying sales to registered providers, regardless of whether the seller is the original landowner or an intervening developer, and it should operate effectively for the mixed-tenure developments that apply to much of the modern social housing sector. The government should also provide a straightforward mechanism for dealing with changes in tenure mix and clear guidance on the interaction with existing VAT reliefs, again with a consistent approach across the UK.

ENDS

Notes to editors: