Changes to VAT treatment of serviced building plots

A serviced building plot is bare land in respect of which civil engineering works have been carried out to provide access to essential services such as gas, electricity, water, main drainage, street lighting and sewerage. HM Revenue and Customs has just announced that there will be a change in the treatment of these serviced building plots. Following the recent VAT tribunal decision in Douglas Virtue and Sonia Virtue trading as Lammermuir Gaming Services, the supply of a serviced building plot of land will be treated as a single exempt supply of land by the landowner. Prior to this decision, the Revenue had treated the supply of land as an exempt supply and the civil engineering works to install the service connections as a standard rated or zero rated supply. This will be bad news for landowners because if the supply of the works is standard-rated, rather than zero rated then any VAT will be an irrecoverable cost to the landowners. Landowners may try to increase the price of the plots but this might mean that the land is not competively priced compared to non-serviced plots and those where the installation of service connections was zero-rated.