Topic: VAT on road works

My client purchased a piece of land with some disused buildings on it. The client incurred a substantial amount of professional fees on examining various environmental issues and opted to tax the site in order to recover these. It has also constructed a road through the site at a cost of £120,000 plus VAT. A housing association has made an offer to purchase the land with a view to building flats with a small shopping complex at the side.

Re: VAT on road works

Road works fall within the definition of new civil engineering work and be subject to mandatory VAT, irrespective of the effect of the option to tax.  A value will also have to be apportioned to the road therefore. A tax invoice should be issued in relation to the parts which are subject to VAT.   

VAT incurred on the construction of the road will remain recoverable in full since the sale of the road will be subject to VAT.