HMRC Issues New Guidance on VAT Treatment of Overage Payments in Property Sales

• HMRC has updated guidance on the VAT treatment of overage payments in property transactions.
• Overage payments are additional sums paid by buyers reflecting post-sale increases in property value.
• Generally, overage payments follow the original VAT treatment of the land or property sale.
• The VAT treatment is determined by the tax point rules and the status of the property at the time the overage payment is received.
• For new commercial buildings, overage payments remain standard-rated for three years after completion, regardless of when received; overage on unopted bare land remains VAT-exempt even if a new building is constructed later.

Source: bkl.co.uk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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