Replacing golden brick: government launches consultation on changes to VAT zero-rating

In its Autumn 2025 Budget, the government announced plans to consult on reform to VAT rules to incentivise the development of land for social housing. Having set itself an ambitious target of delivering 1.5 million new homes over the course of the current parliament, the government’s hope is that these changes could help increase the speed at which new social homes are built.

HM Treasury and HMRC have therefore opened an eight-week consultation on introducing a new VAT zero rate for sales of land intended for the construction of social housing across the UK. The consultation was published on 23 June 2026 and is due to close at 11:59pm on 18 August 2026.

Under existing rules, supplies of land are generally exempt from VAT unless the seller has opted to tax. Construction of qualifying new dwellings can be zero-rated, and the first major interest granted in a new dwelling or its site may also be zero-rated, but a supply of a building in the course of construction can currently only be zero-rated once works have progressed to ‘golden brick’ stage, meaning beyond foundation level. Where land is transferred earlier, it is treated in the same way as bare land, meaning exempt from VAT unless the seller has opted.

Landowners selling land for development choose to opt to tax in order to recover the VAT on their inbound supplies, but the effect of the seller opting to tax is that it will charge the buyer 20% VAT. That VAT charge is irrecoverable as input tax for a buyer making exempt onward supplies, as is the case for registered providers (RPs) of social housing.

A golden brick structure is therefore used where homes are sold to RPs, enabling opted landowners to recover VAT while ensuring RPs are not subject to a 20% VAT charge on acquisition.

The sector has been calling for the zero-rating point to be brought forward. The National Housing Federation has argued for the zero-rating of land sold to RPs where outline planning permission exists for social housing, saying the current golden brick approach causes delay, complexity, added costs, and that zero-rating supplies of land at an earlier stage in the development process would simplify contracting and accelerate delivery. The Housing Forum agrees, saying the current rules hold back housebuilding by:

• making it hard for RPs to get involved at an early stage of the construction process;
• delaying the point at which RPs are able to access grant funding;
• causing cash-flow problems for developers, increasing costs which are then passed on to the RPs;
• making it unclear how golden brick rules should be applied in situations of off-site construction (where a house may be ‘under construction’ in a factory but could, in theory, be placed anywhere), or in phased sites;
• leading to long and complex legal negotiations over whether the golden brick stage has been reached on each project – adding costs and causing delays.

The new consultation indicates the government has accepted these arguments. The consultation document invites views on the scope and administration of a new category of zero-rated supply for sales of bare land (and, one assumes, land on which physical construction work has begun but not reached golden brick stage) to RPs where there is evidence of intention to build social housing on the land.

For developers and RPs, the key questions will be eligibility; timing and safeguards; what counts as ‘social housing’; whether planning status or RP involvement is required at transfer; how mixed-tenure and phased sites are treated; and what clawback applies if land is not ultimately used as intended.

Responses will inform further policy development, with a formal government response and next steps to follow.