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11 October 2022
Grant of option fee on land – exempt or standard rated?
A good land deal?
One of my clients (A) has the opportunity to earn big profits on a lucrative land deal:
- The land is currently owned by a farmer – there are no buildings on it.
- The farmer was paid £350 000 by company A two years ago giving A the right to purchase the land at any time in the next five years for £3m.
- Company A has granted the option to my client for £500 000 meaning that my client can buy the land for £3m and sell at a profit.
- There are no options to tax elections in place on the land for any party.
My understanding was that the £500 000 fee charged to my client by company A would be exempt from VAT but A’s advisers have said that it is not a land supply because A has no direct interest in the...
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