Transitional measures applying to legacy leases

What is the VAT treatment of a legacy lease reversion?

Where a taxable long lease (leases of ten years or more) was created before 1 July 2008, the landlord’s interest in the property subject to that lease is regarded as the reversion on that legacy lease.

Where a landlord sells a reversion on a legacy lease on or after 1 July 2008, the sale of the reversion is in most cases exempt from Value-Added Tax (VAT). Where the sale of a reversionary interest is exempt from VAT there is no Capital Goods Scheme (CGS) adjustment required.

However, if the property was developed by, on behalf of, to the benefit of, the landlord subsequent to the creation of the long lease, the supply of the reversion would be taxable if it occurs while the property is considered new.