An overage payment is usually attached to a disposal of an interest in land where, in addition to the consideration paid at the point of the sale, a further payment will accrue to the vendor on perhaps the successful planning application for the site by the buyer or similar value enhancing impact.Originally HMRC saw overage as a separate supply from the original supply of land. HMRC then decided there was no link to the original supply and it was automatically standard rated. Currently HMRC’s view is that overage payments follow the VAT liability of the original supply regardless of any events that take place in the meantime. This view has not been formally published yet.
Source: centurionvat.com
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