Goodbye golden brick? New VAT zero rate for land sold to registered social landlords

The UK Government has announced plans to bring in a new zero-rated VAT treatment for land sold to registered providers of social housing.

This could remove one sequence of the choreography of delivering much needed affordable housing in Scotland: the requirement to achieve “golden brick” before title is transferred.

Where are we now?

At present, selling bare land to a registered social landlord (RSL) can present a VAT issue. If the seller has opted to tax and it is not disapplied under the existing rules, the sale is standard-rated, and that VAT can cause a problem for the RSL, which generally cannot recover it.

As a result, “golden brick” structures are used where the developer constructs each building to beyond foundation level before transferring the land to the RSL. At that point, the transfer can usually qualify as zero-rated for VAT purposes. 

What is changing?

Following consultation, the Government has announced that it will bring in legislation so that land sold to a registered provider of social housing, as defined in existing VAT legislation, is zero-rated. For Scotland, this should include a registered social landlord.

The Government have advised that the relief will apply to any land sold to a registered provider, rather than depending on how the land is used, in order to be more administratively manageable for HMRC. 

Why the change matters

Golden brick works, but it comes at a price, and for those delivering homes in Scotland in the midst of a housing crisis, any ability to streamline the process will be welcomed. 

The requirement to transfer land at golden brick has a financial impact on those involved. For example, increased legal costs as a result of the added complexity of documentation required for this structure, and developers being exposed to higher cost spend before the transfer to the RSL can take place. 

Being able to transfer land to RSLs at an earlier stage may also open the door to LBTT savings in relation to the developer’s purchase of the land. Provided the statutory conditions are met, a same-day sub-sale of land to a RSL could result in the developer being able to claim sub-sale development relief for LBTT purposes. 

Is this the end of golden brick?

Not necessarily.

The new relief is intended to enable registered providers to acquire land before the golden brick stage, reducing the need for staged transactions and complex contractual structures.

However, golden brick may remain relevant in some transactions. This could include deals that complete before the new rules take effect, acquisitions by entities that do not fall within the qualifying definition, or transactions where the detailed conditions for the new relief are not met.

Existing golden brick arrangements may also continue to provide a useful fallback while the new rules and HMRC guidance bed in.

The detail is still to come

The Government intends to lay secondary legislation in early 2027, with the change taking effect from 1 April 2027. However, that date depends on the legislation being in place in time, and until it is published, how the zero rate will work in practice and how any transitional provisions will apply to deals already agreed or under way remains unknown. 

For deals that will complete around or after April 2027, parties should consider how their contracts need to be framed so as to allow transfers to RSLs to take place as early as possible once the new legislation is in place, whilst protecting parties’ interests and the ability for transfers to go ahead at golden brick stage in the event that there are any delays in the introduction of the new VAT treatment. 

If you would like to discuss how the change could affect your sites or pipeline, please get in touch with Sophia Munro, Peter Chambers or your usual Burness Paull contact.

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