Changing 'golden brick' VAT rules to accelerate affordable housebuilding

The government has announced that it will shortly be consulting on reform to VAT rules to incentivise development on land for social housing. The NHF and other voices from the housebuilding sector called for this in the lead up to the budget.

Under current VAT rules, land can only be zero-rated once construction reaches the ‘golden brick’ stage – a point in the process where a building is deemed to be ‘clearly under construction’, for example, foundations or the first level of bricks have been laid.

This introduces delays, complexities and additional costs into the development process.

These inefficiencies could be overcome through a simple change to VAT rules: zero-rating the sale of land to a registered provider of social housing where outline planning permission exists for the construction of affordable homes.

This would move the point at which the existing zero-rate provisions can be accessed forward at no additional cost to the Exchequer, enabling earlier access to grant and simplifying contracting to accelerate home building.

We expect the consultation to include key questions around the nature of the land and development, how much the current system costs and how much additional development this change could unlock.

We will continue to engage with HMRC and HM Treasury on the details of this measure and will work with our tax advisors BDO to submit a response to the consultation on behalf of the sector.