Fifth Standing Committee on Delegated Legislation


Wednesday 29 January 1997



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The Committee consisted of the following Members:


Baker, Sir Nicholas (North Devon)

Berry, Mr. Roger (Kingswood)

Boyson, Sir Rhodes (Brent, North)

Brandreth, Mr. Gyles (Lord Commissioner to the Treasury)

Bruce, Mr. Malcolm (Gordon)

Carttiss, Mr. Michael (Great Yarmouth)

Connarty, Mr. Michael (Falkirk, East)

Fabricant, Mr. Michael (Mid-Staffordshire)

Hall, Mr. Mike (Warrington, South)

Hill, Mr. Keith (Streatham)

Jenkins, Mr. Brian David (South-East Staffordshire)

Mitchell, Mr. Austin (Great Grimsby)

Oppenheim, Mr. Phillip (Exchequer Secretary to the Treasury)

Primarolo, Ms Dawn (Bristol, South)

Purchase, Mr. Ken (Wolverhampton, North-East)

Sainsbury, Sir Timothy (Hove)

Spicer, Sir Michael (South Worcestershire)

Townsend, Sir Cyril (Bexleyheath)

Willetts, Mr. David (Havant)

Mr. P. A. Evans, Committee Clerk

3 Fifth Standing Committee on Delegated Legislation Wednesday 29 January 1997

[MR. JOHN BUTTERFILL in the Chair]

Value Added Tax (Registered Social Landlords) (No. 2) Order 1997

4.30 pm

The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim): I beg to move, "That the Committee has considered the Value Added Tax (Registered Social Landlords) (No. 2) Order 1997 (S.I. 1997, No. 51). The Order amends value added tax legislation to reflect changes brought about by the Housing Act 1996. The VAT amendments are modest and do not result in a tax burden. The main providers of low-cost housing have been registered housing associations, and they can apply for grant funding. The renting of that form of housing is exempt from VAT, so housing associations are unable to recover the VAT that they pay on capital and overhead costs. The construction of dwellings is zero rated for VAT, so housing associations do not pay VAT to builders when their housing stock is constructed. Generally, sales of land are exempt from VAT, but businesses can instead choose to tax those land sales under an "option to tax" provision. The benefit is that businesses can recover their own input tax. When a purchaser of land or a lessee of a non-domestic building makes VAT-able supplies, it, too, can recover the VAT charged; but of course housing associations cannot recover their input VAT, and the law is that an option to tax cannot be exercised if land is sold to a housing association. The Housing Act 1996 provides for other non-profit making landlords to provide social housing in England and Wales. Local authorities will be able to transfer their housing stock to non-profit making companies known as local housing companies. The Act refers collectively to housing associations and local housing companies as registered social landlords. The VAT relief for housing associations should also be available to the other providers of low-cost housing. The Value Added Tax (Registered Social Landlords) 4 (No. 1) Order 1997, laid under the negative resolution procedure, ensures that the zero rates for housing associations are also available for those other concerns. Order No. 2 ensures that land sold to all registered social landlords is VAT exempt, just as it is for land sold to housing associations. The position in Scotland and Northern Ireland is unchanged. Only housing associations can apply for grants and they continue to benefit from the VAT zero rates and exemptions. Both orders are planned to be effective from 1 March 1997.

4.32 pm

Ms Dawn Primarolo (Bristol, South): I understand that the order makes definitional changes to schedule 10 of the Value Added Tax Act 1994, reflecting changes made under the Housing Act 1996. I seek clarification from the Minister on two points; he covered them, but passed over one quite quickly. The Minister referred to registered housing associations. Was he confirming that the definition of registered social landlords under the Housing Act will include housing associations, and that the exemption continues? I hope that we need not worry about changes there. What is unclear is why the statutory instrument does not make equivalent terminological changes to schedule 8, group 5, item No. 3, which relates to the zero rate for supply to registered housing associations converting non-residential buildings to dwellings. Will the Minister confirm that that will be dealt with by the second order to which he referred? I was not clear on that.

4.34 pm

Mr. Oppenheim: Yes, I can confirm all those things. First, the changes are basically definitional. Secondly, "registered social landlords" includes housing associations. Thirdly, the second order does relate to conversion of housing properties that will then benefit from being zero rated—a significant benefit for housing associations and other bodies.

Question put and agreed to.

Resolved. That the Committee has considered the Value Added Tax (Registered Social Landlords) (No. 2) Order 1997 (S.I. 1997, No. 51).

Committee rose at twenty-five minutes to Five o'clock.



Butterfill, Mr. John (Chairman)

Boyson, Sir Rhodes

Brandreth, Mr.

Carttiss, Mr.

Fabricant, Mr.

Oppenheim, Mr.

Primarolo, Ms

Spicer, Sir Michal

Townsend, Sir Cyril D.

Willetts, Mr.