To sell (golf club land) or not to sell?

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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Pressure for housing in all areas and the lure of a lovely outlook mean that the immaculate landscaping of golf clubs makes a tempting combination for developers. It is no surprise, then, that golf clubs are being tempted into selling parcels of land for development.

However, those clubs with spare parcels of land need to consider the VAT aspects very carefully, especially when developers are offering tempting terms.

Often there is an initial small fee paid to a club for an “option to purchase” the land in question, with a significant cash injection when planning permission is granted. However, nothing is as simple as it seems, and golf clubs need to make decisions that will favour the members.

At a basic level, any sale of land in the UK is exempt from VAT, unless the vendor has “opted to tax” or “opted to waive exemption”. As some golf clubs know, the addition of further exempt income can impact on their VAT recovery. It’s not all doom and gloom however! The impact is restricted to the input tax on the direct costs of the sale where the sale of land is an incidental supply. As most golf clubs are not in the real estate sector, the incidental supply rules will apply. What this means is that the value of the land sale is not included in the exempt income when calculating the input tax recoverable on the overheads, or “residual” VAT.

However, where the golf club is responsible for the costs of gaining the planning permission for the development, the directly attributable input tax soon mounts up and the club may be tempted to opt to tax in order to recover the input tax.

Opting to tax is not necessarily the answer either. It is not necessarily the VAT on the sale that is the issue, although cash flow can be a problem for developers. It is the Stamp Duty Land Tax (“SDLT”) that is the fly in the ointment. SDLT is due on the VAT inclusive price of the land value and where a developer has a choice of exempt land or a purchase with VAT added, the developer may naturally choose the exempt supply, as SDLT could be as high as 5% on a typical land purchase for residential development and 5% of the VAT figure can mount up.

To counter this, developers may offer incentives such as a new club house on part of the land purchased or the refurbishment/extension of the existing one. If the cash price is lowered by the value of the incentive, it is a barter transaction, and the value of the barter is that of the incentive. VAT would still be due on the cash value plus the value of the incentive. Whilst the developer can claim the VAT charged on the purchase price, the golf club may not be able to on the incentive if the provision of it is taxable.

So, any agreement to sell land for development must be looked at closely for any VAT issues and golf clubs need to be robust in their negotiations with developers. Advice should be sought on the specifics of the agreement before it is signed, otherwise, mitigating any VAT leakage is difficult.

If you need advice on VAT for golf clubs or otherwise, please get in touch with Ruth Corkin on the details below.

Do you need extra information?

Ruth Corkin - Prinicipal - VAT and Indirect Tax Advisory at Hillier Hopkins

Ruth has been involved with VAT for over 30 years. She started her VAT career as a Customs and Excise Officer in Essex and then moved into consultancy with a variety of well-known accountancy firms. She is well known in the VAT world and is the proud author of many articles and technical works.

Contact Ruth at or on +44 (0)1908 713860

Based at the following office - Milton Keynes, Watford and London