Government consults on new VAT zero rate for land intended for construction of social housing

Exchequer Secretary to the Treasury Dan Tomlinson said more land was needed to meet the Government’s target of 1.5m new homes during this Parliament .

Social landlords had suggested the VAT treatment of land could better support social housing with the new zero rate land sales.

Mr Tomlinson said in a foreword that any relief “will need to be targeted, effective and fiscally responsible. That means designing rules that will genuinely support social housing delivery whilst protecting vital tax revenues and minimising the scope for abuse.”

Some social housing developers had told ministers that VAT reliefs can negatively influence the timing of when they take title to land, which is a critical point in accessing the largest tranche of grant funding for social housing construction.

Landowners, developers and providers would all benefit from a zero-rated transaction, the Government said.

Under existing VAT rules the earliest point a zero rate can apply is when up to 60% of the whole costs of the projects been incurred, which the Government said may cause cashflow issues that delay construction.

The consultation is open for responses until 18 August 2026.

Mark Smulian