Disposal - VAT and Stamp Duty

The implications of VAT need to be considered when acquiring or disposing of land and/or property. Stamp Duty generally only affects acquisition because the purchaser normally pays any Stamp Duty.

Although the council is not a business, it is subject to VAT law on partial exemption. Income from the sale or lease of land and buildings will normally be VAT exempt. Local government partial exemption rules specify that when the VAT reclaimed on expenditure incurred to bring in VAT exempt income exceeds 5% of the total VAT reclaimed in a financial year, the whole of such exempt-related VAT must be refunded to HM Customs & Excise. At the level of VAT reclaim anticipated for 2002/3, this represents a potential refund of £1.7 million. As land and property transactions form a substantial part of VAT exempt activity, one way of lessening the risk is the "option to tax" on certain large transactions of this type, as it converts what would otherwise be VAT-exempt income into standard-rated income.

The county council's Taxation Manager should be consulted. Contact details are:

Taxation Manager
Finance and Procurement
Corporate Core
County Hall

Tel: 01865 815511