Golden brick – is it time for a rethink?

Moreover, associations are increasingly moving towards ‘land-led’ deals, where the seller is simply providing land and no development works. Acquiring the property when it has been partly developed may simply not be possible.

In these circumstances, more housing groups are concluding that they need a new approach that manages the situation in-house.

A subsidiary, perhaps one that already provides design and build services, will acquire the land and develop it to golden-brick level before selling it to the housing association.

It must be said that this solution can raise as many issues as it resolves, including funding this subsidiary and stamp duty, so is not a panacea.

An outdated definition

Perhaps the meaning of ‘golden brick’ also needs reconsidering. Are current definitions far too late in the construction process? I would argue that they are.

The traditional definition has been one level of bricks above the damp proof course (DPC+1). HMRC stated in public guidance that you can zero-rate the sale of “land that will form the site of a building provided a building is clearly under construction”.

In its internal manuals, it expanded on this to state that this point will be “when work has progressed above foundation level”. Although this is normally when walls start to be constructed on the foundations, it could be below ground level if there is an underground car park etc.

But how does this fit with modern methods of construction? There may be a building plot that currently comprises nothing more than a concrete slab, but if I went to the factory 20 miles away, I would see the various parts of the house being assembled. Is this a house clearly under construction?

There have been suggestions that the installation of ‘concrete kickers’ might be the modern equivalent of DPC+1, or perhaps when the walls making up the ground floor have been fixed together in the factory.

However, these suggestions seem to be fitting the proverbial square peg into a round hole. HMRC sent some questionnaires to the construction industry on this point in 2020, but no policy updates have been released yet.

Legislation simply refers to the sale by a party ‘constructing a building’. Would the average person say that a property owner who had spent months demolishing existing structures, preparing the land and building up the foundations was constructing a building?

2023 marks the 15th anniversary of the introduction of VAT in the UK. How buildings are constructed has changed significantly over this period.

While the law may not need changing, I believe its interpretation needs to catch up with the times. If this is possible, it should make it much easier for housing associations to work with landowners and developers to build the homes we need.

Adam Cutler, lead – social housing tax, Crowe