Selling vs Leasing Vacant Land/Residential Premises
24 June 2009
You should note that the lease of vacant land will not be treated as an input taxed supply where the land previously contained residential premises. In devoting the land to the purpose of leasing it in its vacant state to the third party, the entity is using the land for a separate purpose. This is because, unlike the disposal of the ownership of the land by way of sale, the entity continues to hold the land while leasing it to the third party. The entity is devoting the land to a separate on-going activity of the entity's enterprise (that is, leasing of the vacant land) which is not connected with bringing to an end the earlier residential leasing activities. For this reason, the entity is no longer using the land solely in connection with the entity's earlier input taxed supplies of residential premises by way of lease.