Jurisdiction(s):
United Kingdom

Key definition

Input tax definition

What does Input tax mean? Input tax is the vat a VAT‑registered business incurs on purchases, imports and certain self‑assessed charges, which it may deduct from its output tax on its VAT return if the costs are used for the business’s taxable activities. In the UK (including the Isle of Man), input tax is defined in legislation: Value Added Tax Act 1994, section 24(1). It covers VAT on supplies to the taxable person, import VAT and (where applicable) VAT on intra‑EU acquisitions, provided the goods or services are used, or to be used, for the purposes of any business carried on or to...

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

Published by a LexisNexis Tax expert

Practice notes

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?

...

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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...

Web page updated on 22/05/2026

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