To Sell (golf Club Land) Or Not To Sell?
Published date | 21 June 2022 |
Subject Matter | Tax, Income Tax, Sales Taxes: VAT, GST |
Law Firm | Hillier Hopkins |
Author | Ms Ruth Corkin |
Pressure for housing in all areas and the lure of a lovely outlook mean that the immaculate landscaping of golf clubs makes a tempting combination for developers. It is no surprise, then, that golf clubs are being tempted into selling parcels of land for development.
However, those clubs with spare parcels of land need to consider the VAT aspects very carefully, especially when developers are offering tempting terms.
Often there is an initial small fee paid to a club for an "option to purchase" the land in question, with a significant cash injection when planning permission is granted. However, nothing is as simple as it seems, and golf clubs need to make decisions that will favour the members.
At a basic level, any sale of land in the UK is exempt from VAT, unless the vendor has "opted to tax" or "opted to waive exemption". As some golf clubs know, the addition of further exempt income can impact on their VAT recovery. It's not all doom and gloom however! The impact is restricted to the input tax on the direct costs of the sale where the sale of land is an incidental supply. As most golf clubs are not in the real estate sector, the incidental supply rules will apply. What this means is that the value of the land sale is not included in the exempt income when calculating the input tax recoverable on the overheads, or "residual" VAT.
However, where the golf club is responsible for the costs of gaining the planning permission for the development, the directly attributable input tax soon mounts up and the club may be tempted to opt to tax in order to recover the input tax.
Opting to tax is not necessarily the answer either. It is...
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