Insights Commercial Property Law – Key Considerations (February 2022)


Our February 2022 summary of the latest developments in Property law and practice is as follows:

HMRC has published its response following a call for evidence surrounding VAT land exemption. It has indicated that it is unlikely to make any fundamental changes to VAT land exemption (despite their previous suggestions for reform) but has explained that it will be providing guidance and clarification on important areas in 2022. In particular with regard to:

  1. VAT on dilapidation payments: HMRC has previously held the position that dilapidation payments are subject to VAT if permitted under the lease. However, practitioners argue that such dilapidation payments represent damages rather than consideration and should therefore not be subject to VAT.
  2. Option agreements: There is ongoing conflict between HMRC guidance and the tribunals as to whether the grant of an option to acquire land is a standard rated supply of services rather than a standard supply of land.

The Building Regulations etc. (Amendment) (England) (No. 2) Regulations 2021 (S.I. 2021/1392) are set to come into force on 15 June 2022. The amendments will introduce a new part ‘S’ into Schedule 1 of the Building Regulations 2010, requiring the installation of EV charge points or cables for new or newly renovated residential and non-residential buildings.

Under the Government’s First Homes policy (applying in England since 28 June 2021) housebuilders are expected to dispose of 25% of all affordable housing units through planning obligations as First Homes. First Homes are dwellings that meet the definition of affordable housing for planning purposes and which are discounted on sale by a minimum of 30% against the market value, and are disposed of to eligible buyers.

The Department for Levelling Up, Housing and Communities has now published model clauses for use by local authorities and housebuilders in preparing section 106 agreements for sites that will deliver these ‘First Homes’ through developer contributions.

The Welsh Government is consulting on proposals to introduce local changes to the Land Transaction Tax rates for residential properties that are acquired as second homes, short term holiday lets or other additional residential properties. The consultation will cover the size of areas in which local variations could take place, the procedure for identifying the areas where different rates may apply, and the types of transactions that could be subject to different rates in Local Areas.

A consultation paper has been published by HM Revenue & Customs on “Stamp Duty Land Tax: mixed-property purchases and Multiple Dwellings Relief.” HMRC is seeking views on options to change SDLT rules relating to mixed property purchases and multiple dwellings relief. These are areas where great uncertainty can exist and where attempts are made by taxpayers, and their advisers, to minimise tax liability by arguing that what HMRC regards as a residential property purchase is in fact a purchase of a mix of residential and non-residential property, or by arguing that a transaction involves two dwellings, so that MDR applies, whereas HMRC see it as relating to one. The consultation runs until 22 February 2022.