Martin Scammell
Martin Scammell is an independent VAT consultant, specialising in property and construction matters, who works with tax departments in major corporates and universities, and with a number of law and accountancy firms. He is the author of the leading reference work on VAT and property.
Martin started out in VAT Policy in Customs & Excise, was a Partner at Ernst & Young, where he headed up the VAT real estate group, and then became head of indirect tax at Eversheds.
He has been involved in the development of VAT legislation and policy over many years, and regularly serves on working parties established by HMRC. He was a member of the Office of Tax Simplification’s consultative committee for their review of VAT in 2017, and in 2018-19 of HMRC’s external stakeholder group considering the proposed reverse charge for building work. Martin currently works with HMRC as technical secretary to the British Property Federation’s VAT Committee, as an adviser to the British Universities’ Finance Directors’ Group and as a member of HMRC’s Joint VAT Consultative Committee and VAT Land and Property Liaison Group. He is a member of the Chartered Institution of Taxation’s indirect taxes and property taxes committees.
Practice Area
Panel
- Contributing Author
27 Contributions by Martin Scammell
PRACTICE NOTES
UK construction VAT domestic reverse charge: scope, exclusions, end-user and intermediary supplier rules, CIS interaction, contract drafting, and accounting for suppliers and customers
This Practice Note concerns the VAT domestic reverse charge (DRC) for building and construction services, which took effect on 1 March 2021.
Why does this matter?
The reverse charge brings substantial accounting and verification consequences for building contractors and comparable trades, and may affect their clients. It impacts cashflow, and there is a danger of VAT being applied in error, leaving businesses open to assessments and penalties if they attempt to reclaim it as input tax. Carefulness is essential, and the status will need confirming before monies are released. Many issues are best tackled at the outset, within construction contracts.
What is a reverse charge?
A reverse charge is a method by which the customer, rather than the supplier, accounts for any VAT due. As a result, customers settle only the net value with their suppliers, and suppliers should not add VAT to their charges. Although the general reverse charge for building activity was introduced only in 2021, similar arrangements already existed for dealings in specific items, such as mobile phones and computer chips, and for certain goods and services, including building work, received from outside the UK (see Practice Note: VAT—the reverse charge on cross-border supplies). The newer measure...
Tax
PRACTICE NOTES
UK VAT Capital Goods Scheme (CGS): thresholds, partial exemption, adjustments, disposals/TOGCs, part disposals, non-business use, and property issues (dwellings, RRP/RCP), with opt to tax considerations
FORTHCOMING CHANGE :
HMRC issued a call for evidence in 2019 on ‘simplifying’ the VAT partial exemption rules and the capital goods scheme (CGS). In March 2021 this was followed by a summary of responses that set out adjustments to partial exemption processes and confirmed HMRC would continue to engage with stakeholders on other matters. No timetable was provided for any subsequent steps, yet it appears probable that, in due course, the CGS threshold for land and property will be lifted, perhaps to £1m, with other assets removed from the scheme altogether.
Why does this matter?
This Practice Note examines the principles of the VAT capital goods scheme. The CGS can give rise to a significant liability for property owners, especially on a disposal. That exposure is usually avoidable, but only where it is identified and appropriate measures are taken. This does not invariably occur, and negligence claims are not uncommon. The CGS can also, on occasion, enable additional VAT to be recovered from HMRC, and for certain businesses it imposes an ongoing compliance obligation...
Tax
PRACTICE NOTES
UK VAT in commercial developments: option to tax, anti-avoidance disapplication, input recovery, TOGCs, forward funding/sales, planning/CIL, tenant incentives, surplus land and rights to light
This Practice Note addresses the VAT considerations that arise in commercial development projects. It first outlines a simple, uncontentious scenario, then explores:
when and whether the developer should opt to tax
input tax recovery and circumstances in which that option could be disapplied
whether a sale to an investor qualifies as a transfer of a going concern (TOGC)
alternative development structures, such as forward funding and forward sales
planning obligations and other payments towards local infrastructure
tenant incentives
disposals of surplus land and incomplete schemes, and
rights to light
For VAT issues in residential developments, see Practice Note: Residential development—VAT issues.
Basic scenario
There can be a variety of VAT considerations with commercial schemes, yet in practice most projects do not create major difficulties. It is helpful to begin with a clear, uneventful example involving a speculative development. In this situation, the developer identifies an opportunity and opts to tax at that point, intending to make taxable supplies from the development (see Practice Note: The option to tax land and buildings)...
Tax
PRACTICE NOTES
UK VAT on Building and Construction Works: Zero/Reduced Rates, Reverse Charge, Dwellings, RRP/RCP, Conversions, Empty Homes, Energy-saving Materials, Disability and Charity Reliefs, Housing Associations, Refund Schemes
This Practice Note is about the .
More specifically, it considers which categories of building work qualify for VAT relief, either through zero rating or by applying the reduced VAT rate. To benefit from relief, there must be both an appropriate kind of building and an appropriate scope of work. Why is that important? This is, naturally, significant to those undertaking it, but it also feeds into project appraisals, and influences whether development and investment prospects are viable. If the VAT is ultimately recoverable, it might appear unimportant whether the contractor charges it. However, even then it is crucial to ensure the correct reliefs are used, as HMRC will not reimburse VAT that should never have been paid. A final consideration is that businesses commissioning construction may, in some cases, need to account for VAT themselves under a ‘reverse charge’...
Tax
PRACTICE NOTES
UK VAT on commercial property service charges: single vs separate supplies; exceptions, utilities, business rates, insurance, office services, sinking funds and managing agents
This Practice Note explains the VAT treatment of non-residential service charges.
General position
Service charges are ordinarily payable to the landlord under a lease or licence, much like rent, and therefore reflect the same VAT treatment as the rent. This is because there is no distinct supply—the rent and service charge together constitute payment for a letting of serviced premises. Certain charges may, however, need alternative treatment:
there may be a separate supply, typically where the tenant pays solely according to its own consumption—metered utility charges are an example
the amount may be a disbursement, where the landlord settles and recharges a cost that is legally the tenant’s responsibility—business rates are an example, if the tenant is the rateable person
These and other specific categories of charge are considered in more detail below.
Exceptions to the general position
The position differs:
if a party other than the landlord, such as a management company, is contractually required to provide the services to the tenant.
It may be necessary to analyse the contractual relationships—in particular, it makes no difference if the service charge...
Tax
PRACTICE NOTES
UK VAT on granting and managing leases: option to tax, timing, tenant recovery, inducements and rent-free periods, rent payment, landlord’s costs, variations, defaults, and VAT clauses
This Practice Note sets out the VAT matters to address when granting a lease and during an ongoing lease.
whether VAT is payable
when it becomes due
the tenant’s position on recovering VAT
inducements
payment of rent
the tenant paying the landlord’s costs
changes to the lease
tenant default
which VAT provisions ought to be included in the lease
For the VAT points to consider where a lease is assigned or brought to an end (including by surrender), see Practice Note: VAT issues for lease assignments and terminations.
Is VAT chargeable?...
Tax
PRACTICE NOTES
UK VAT on land and buildings: Disapplication of the option to tax under anti-avoidance rules—CGS, occupier tests, development financiers and TOGC implications
This Practice Note explains when the VAT option to tax is disapplied under anti-avoidance provisions (see Practice Note: The option to tax land and buildings).
Why does this matter?
Where the conditions set out in this Practice Note are satisfied, the option to tax is switched off automatically. The parties have no discretion, and no tax avoidance purpose is required. As a result, the option can be turned off in routine commercial deals, so significant caution is often necessary. The rules operate to override an option to tax and render a sale or letting exempt, preventing the vendor or landlord from reclaiming VAT attributable to the property. The consequences can be especially severe for property developers. The regime is also pertinent to transfers of a going concern (TOGC) (see Practice Note: VAT—transfers of a going concern involving land and buildings), and it is sometimes invoked deliberately so that a deal is VAT-exempt. Disapplication suspends the option rather than nullifies it. Even if the option is disapplied for a particular transaction, it may still take effect for subsequent transactions. Accordingly, later supplies could still fall within the option once disapplication ceases. In short, the option is paused, not abolished...
Tax
PRACTICE NOTES
UK VAT on Land and Buildings: Exclusions from Exemption and Interactions with Options to Tax, Zero-rating and Other Exemptions
This Practice Note sets out the exclusions from the VAT exemption for property transactions, together with other interacting provisions. The exclusions relating to parking and to storage are dealt with in full in Practice Notes: VAT treatment of parking facilities and VAT treatment of storage facilities.
It includes references to EU legislation and case law. For guidance on the continuing relevance of EU law in the UK after the end of the Brexit implementation period on 31 December 2020, see Practice Note: Retained EU law and tax. Unless indicated otherwise, references to judgments of the EU Court of Justice in this Practice Note are to decisions handed down before that implementation period ended.
Why does this matter?
As a rule, supplies involving property are within the scope of VAT only where the seller or landlord has opted to tax (see Practice Note: The option to tax land and buildings). However, there are circumstances in which VAT is due automatically, irrespective of whether an option has been made. Pinpointing these situations is crucial so that VAT is correctly charged and accounted for, and so that sale agreements and leases allow for it when being drafted.
Where are the exclusions relevant?
...
Tax
PRACTICE NOTES
UK VAT on lease assignments, surrenders and break payments: option to tax, TOGCs, compensation, inducements, dilapidations, rent apportionments and the capital goods scheme
This Practice Note examines VAT points to address when a lease is assigned or brought to an end. In this Practice Note, unless indicated otherwise, termination covers any form of ending a lease, including surrender, use of a break option, forfeiture, and a disclaimer in insolvency.
Must the seller account for VAT?...
Tax
PRACTICE NOTES
UK VAT on overage in land transactions: treatment, tax points, option to tax/disapplication, new freehold building rules, anti-avoidance and subsequent dealings
This Practice Note explores the VAT consequences of overage payments. Why is this important? In simple terms, where the underlying sale attracting the overage was taxable for VAT, the overage will itself carry VAT, ordinarily becoming chargeable only when the overage is actually paid; however, there are significant exceptions.
Accordingly, sellers may encounter unforeseen liabilities, and at unexpected points in time, so sale contracts must reflect the correct VAT position. Moreover, HMRC offers no comment in guidance, and there have been instances of it misunderstanding overage arrangements, or their VAT analysis, leading it to dispute a position even where VAT has been correctly accounted for. It is therefore prudent to record, at the time, the rationale for the approach adopted, together with any professional advice obtained.
What is overage?
Overage refers to a scenario in which a seller—often, though not exclusively, of land—retains a right to receive from the purchaser a further amount of consideration after completion and after any initial price has been paid...
Tax
PRACTICE NOTES
UK VAT on Parking: scope, leases/licences, parking v storage, local authorities, penalties/overpayments, and parking with residential or commercial property (zero-rating and exemption)
This Practice Note concerns the . It includes references to EU legislation and case law. For guidance on the continuing effect of EU law in the UK after the close of the Brexit implementation period on 31 December 2020, see Practice Note: Retained EU law and tax. Unless indicated otherwise, all rulings of the EU Court of Justice cited here were delivered prior to the end of that implementation period. Accordingly, references to EU case law in this Note should be read in that temporal context.
Why does this matter?
Parking fees are generally liable to VAT; this also covers leases and licences for whole car parks or blocks of garages, meaning the amounts at stake can be significant and VAT must be factored into sale and lease documentation. VAT can, in some circumstances, arise where parking is supplied alongside other accommodation, including residential property, making the issues pertinent to plot disposals. Where a seller or landlord has opted to tax, the deal will usually be standard-rated in any event, yet the VAT treatment of parking overrides the exceptions from the option. See Practice Notes: Option to tax—disapplication under anti-avoidance rules and Option to tax—disapplication for residential and other property...
Tax
PRACTICE NOTES
UK VAT on Storage Facilities: Beyond 'Self-storage', Scope, Headleases, Ancillary Use, Exceptions and Landlord Obligations
This Practice Note concerns the .
Why does this matter?
From 1 October 2012, supplying storage facilities has broadly fallen within the scope of VAT; yet many organisations impacted failed to appreciate this, as HMRC and the government continued for a long time to characterise the reform as concerning ‘self‑storage’ alone. In reality, the point is still frequently missed, and HMRC seems largely uninterested except where dealing with genuine self‑storage providers and operators. Because HMRC considers liability to turn on how premises are actually used rather than the intended use, landlords should carefully track what their tenants do and/or add further terms to leases and licences to identify precisely where VAT bites.
What do landlords need to do?
No steps are required where the grant is already taxable, for instance due to an option to tax being in place. Otherwise, where lettings are being treated as exempt, they should verify whether the tenant’s use of the space gives rise to a VAT charge and, as this may alter over the life of the lease, review the position from time to time and keep it under review...
Tax
PRACTICE NOTES
UK VAT option to tax: disapplication for dwellings, RRP/RCP buildings, housing association and self-build sites, and residential caravans/houseboats—certification, timing, mixed-use apportionment and CGS implications
Disapplication of the VAT option to tax for residential and some other property
This Practice Note explains when the VAT option to tax is disapplied for residential and certain other property, and refers to the Practice Note on the option to tax land and buildings. It does not address disapplication under the anti-avoidance provisions; for that, see the Practice Note on option to tax—disapplication under anti-avoidance rules. Where the conditions bite, they override an option to tax so that a sale or letting is exempt. In situations where these provisions apply, the purchaser or tenant would be unable to reclaim the VAT, so exemption can be a valuable advantage. However, the vendor or landlord would be unable to recover associated VAT and may face a charge under the capital goods scheme (CGS); see Practice Note on VAT—capital goods scheme (CGS). These consequences must be taken into account on any deal. Often the parties can decide whether to disapply the option. Ideally, this should be negotiated, and in cases structures can remove a VAT exposure. The purchaser or tenant may have to issue a certificate for the disapplication to take effect, and there are timing rules governing this...
Tax
PRACTICE NOTES
UK VAT place of supply for land and land-related services: rules, definitions, legal/professional services, reverse charge and registration
This Practice Note considers the VAT place of supply rules for property transactions and related services. For guidance on where supplies of other services, or of goods, are treated as made, see Practice Notes: VAT place of supply rules—where is a supply made? and VAT place of supply rules—special rules for services. This Practice Note includes references to EU legislation, guidance and case law. For discussion of the continuing effect of EU law in the UK after the end of the Brexit implementation period on 31 December 2020, see Practice Note: Retained EU law and tax. Unless stated otherwise, all judgments of the EU Court of Justice mentioned in this Practice Note were determined before the end of the Brexit implementation period.
Why does this matter?
UK VAT is chargeable only when the supply is regarded as made in the UK. If not, it falls outside the scope of UK VAT, though VAT may arise in another country. For most services, the position is determined by where the parties are established (see Practice Note: VAT place of supply rules—where is a supply made?), but for land-related services it depends on the location of the property...
Tax
PRACTICE NOTES
UK VAT tax points for land and property: sales and lettings, deposits, unascertainable consideration, compulsory purchase, anti-avoidance for connected persons, and invoicing/cashflow considerations
This Practice Note addresses the VAT time of supply rules applying to property transactions. For a summary of the general time of supply framework, see Practice Note: VAT time of supply rules—when is a supply made?
Why does this matter?
VAT must be accounted for to HMRC on the VAT return covering the period in which the time of supply—often called the ‘tax point’—arises in practice. If that point precedes the customer’s obligation to pay the VAT to the supplier, the supplier will be out of pocket and may need to finance the VAT amount from their own resources. Solicitors should determine when VAT will fall due to HMRC to avoid this outcome or, at the very least, ensure the client knows it will occur and plan accordingly. It can be prudent for the parties to agree when the VAT sum is paid, aligning payment terms with the tax point to help both sides manage cashflow and reduce funding strain, where possible...
Tax
PRACTICE NOTES
UK VAT TOGCs for Land and Buildings: Option to Tax, Article 5(2B) Notification, Lettings, Leases, Developments, Registration, Timing and Consequences
This Practice Note is about the issues that arise on a transfer of a going concern involving land and buildings
For VAT purposes, a transfer of a going concern (TOGC) carries two separate meanings:
the ordinary sense, being simply the disposal of a continuing business—this is relevant, in particular, to the purchaser’s VAT registration position; and
a transaction treated as a non-supply for VAT purposes, so that, in particular, no VAT is chargeable on it
Although both uses are often described as a TOGC, for the remainder of this Practice Note the term is confined to the second of these meanings, referring to a non-supply...
Tax
PRACTICE NOTES
UK VAT zero-rating of first grants of a major interest in newly constructed dwellings: dwelling tests, 'person constructing', planning/residence restrictions, VAT groups, site extent and input tax recovery
This Practice Note explains the zero-rating of VAT for developers who sell or let dwellings they have built
Why does zero-rating matter?
Without zero-rating, the supply is typically exempt, meaning the developer is unable to reclaim VAT (ie input tax) on related expenditure, for example on professional fees and potentially on the site acquisition. For more details, see Practice Note: When can a person recover VAT?
The building services provided during the construction of the dwelling will, in most cases, already have been zero-rated; see Practice Note: VAT treatment of building work. Where that is so, a developer who did not suffer VAT on buying the site may view zero-rating of sales and leases as advantageous, though not strictly necessary
Why might zero-rating not apply?
...
Tax
PRACTICE NOTES
UK VAT: Land and Buildings Exemption—Scope, Exclusions, Option to Tax, Licences to Occupy, Rights over Land, Fixtures, TOGC and Zero-Rating
FORTHCOMING CHANGE :
HMRC issued a call for evidence, ‘Simplifying the VAT Land Exemption’, in May 2021, seeking views and input on bold options for redefining the exemption’s scope and future direction. Among the ideas were bringing all ‘short‑term or minor’ rights over land within the VAT net, or abolishing the existing ‘option to tax’ regime and instead treating every land deal as subject to VAT, with targeted carve‑outs for, for example, residential or charitable property. While these suggestions largely failed to win favour with respondents, they may nevertheless signal narrower and potentially more suitable reforms that HMRC could look to advance in the near term. The evidence‑gathering consultation exercise ran from 12 May 2021 to 3 August 2021. A response summary appeared on Tax Administration and Maintenance Day on 30 November 2021, confirming that the government did not, at that point, plan any further action on proposals previously set aside by the Office of Tax Simplification, but intended to continue engagement with stakeholders on the topics from 2022. For further details, see News Analysis: Views on HMRC’s proposals to simplify VAT land exemption rules and Tax Administration and Maintenance Day—30 November 2021—Simplifying the VAT land exemption...
Tax
PRACTICE NOTES
UK VAT: Option to Tax Land and Buildings—Scope, Exercise and Notification, Disapplication, Revocation, TOGC and Practical Considerations for Property Lawyers
This Practice Note addresses opting to tax land and buildings. It looks at who may make the election, the breadth of that election, how it is exercised and notified, the consequent effects, when it can be withdrawn, and the pros and cons of opting. For situations where the election is expressly disapplied, see Practice Notes: Option to tax—disapplication for residential and other property and Option to tax—disapplication under anti-avoidance rules.
Why does this matter?
By default, property dealings are VAT‑exempt (see Practice Note: Exemption from VAT for land and buildings), meaning no VAT is charged and associated input tax is irrecoverable. Electing to opt generally converts supplies into taxable ones and enables input tax recovery. In day‑to‑day practice, the majority of commercial property is covered by an option to tax. As a rule, once a property owner has opted, the election governs all of their transactions involving that property. Accordingly, if they have opted to tax lettings, the same option will also apply on a later disposal of the property. This covers, for example, disposals as well as lettings...
Tax
PRACTICE NOTES
UK VAT: Zero-rating for converters of non-residential buildings—first grants for dwellings and for a relevant residential purpose, conditions, input tax recovery and pitfalls
This Practice Note considers when VAT zero-rating applies to developers who sell or let non-residential properties they have transformed for residential use—either as dwellings or for a relevant residential purpose.
Why does zero-rating matter?
If zero-rating is unavailable, the supply is generally exempt and the developer is unable to reclaim VAT (ie input tax) on costs, for example on the building’s conversion, professional fees and possibly on buying the property. For further guidance, see Practice Note: When can a person recover VAT? VAT cannot be reclaimed if it ought not to have been charged. Put simply, VAT charged in error is not reclaimable. Care is therefore required throughout projects. Where the project creates a dwelling, the conversion services are commonly taxed at 5%, or are zero-rated where a housing association commissions the work (see Practice Note: VAT treatment of building work). A 20% VAT claim may be disallowed or curtailed, so the developer must ensure these reliefs are fully taken up.
Why might zero-rating not apply?
For conversions to dwellings, the most common reasons are that:
there are planning restrictions on the permitted use of the new dwelling (see below), or
the new dwelling, or part of it, was previously...
Tax
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