On 5 April 2018, HMRC published guidance on whether a partnership VAT registration or individual VAT registrations may be required when two or more persons enter into a land collaboration or joint venture arrangement. The guidance is short and does not provide any background indicating why HMRC has issued it. However, it is known that these arrangements have given rise to uncertainty as to whether a collaborator’s share in the proceeds from land supplies represents consideration for a supply made to the other collaborator(s) (or a profit share from the joint venture that is not a supply).
If taxable supplies above the registration threshold are, or are expected to be, made, collaborators should register as a partnership if they jointly own the land, let or develop the land together and will share the benefits of the taxable supplies. Trustees making taxable supplies with another trustee will also normally need to register as a partnership. Registration as a partnership will not necessarily mean the collaborators are in partnership under general law (the different forms of registration are limited; for example co-owners are generally registered as partnerships.
Conversely, a collaborator should register separately (if required to do so) if it is the sole legal and beneficial owner of the land. Additionally, the following should register separately:
- A collaborator who is the only taxable person receiving income from the taxable land supplies.
- Non-land owning collaborators providing a service.
- Collaborators among whom “the land is split” that will supply goods or services separately.
Land collaboration arrangements may come in many forms. HMRC’s VAT Land and Property Manual (at VATLP04400) illustrates some. In relation to these, HMRC states that a partnership cannot exist where the property in question is owned by only one of the parties. Another form is where collaborators enter into an agreement under which they retain ownership of their respective properties and agree to promote the combined site together, and to share the sales proceeds and costs in set proportions. It is understood that in this type of arrangement HMRC has allowed a partnership registration even though collaborators retain ownership of their respective plots. This guidance would seem to suggest that separate registrations should be obtained.
Due to the complex nature of these arrangements and the tax implications it is imperative that landowners seek the advice of their accountants prior to entering into any such arrangements.