This is an annex to the Bloomsbury Professional looseleaf VAT on Construction, Land and Property, which is a practical and comprehensive guide for anyone concerned with property or construction. It covers general VAT issues from a property and construction perspective, including detailed chapters on partial exemption, the Capital Goods Scheme and issues with planning and avoidance. One section deals specifically with the rules for property, the scope of exemption, the transfer of a going concern, non-supplies and forms of property ownership. The special rules on dwellings, residential and charity buildings are also dealt with, plus the VAT issues for businesses involved in property activities such as housebuilding, purchases and sales, land ownership and hotel and leisure activities.
The questions and answers below are intended to help decide the VAT liability of building work undertaken in the UK or Isle of Man. The answers cannot be definitive – the text should be used to identify issues, and in conjunction with the Chapters mentioned.
The answers assume that the work is done in the course or furtherance of a business, and for consideration, such as payment, and that the parties are not VAT grouped with each other.
In some cases different parts of the works may have different liabilities, for example if a building contains both dwellings and commercial premises.
1 Are the works to, or the construction of, a building, or the site of a building?
C2.3.3 looks at what constitutes a building.
Yes Go to Question 2.
No The works are standard-rated, unless they are the development of a permanent park for residential caravans (D9.7.5).
2 Is the building any of the following:
Designed as a dwelling or a number of dwellings? Essentially, a dwelling consists of self-contained living accommodation, but there is more about this in Chapter C2. It may not matter that the property is not being used as a dwelling – it might be a holiday home or a doctor's surgery. A garage for use with a dwelling will in some cases count as part of the dwelling.
Intended solely for use for a 'relevant residential purpose' (RRP)? This covers various types of communal living accommodation, and is explained in C6.2 to 6.
Intended solely for use for a 'relevant charitable purpose' (RCP)? This covers use by a charity:
— for non-business purposes; or
— as a village hall or similarly
and is explained in C6.7 to 10.
Yes Go to Question 3.
No The works are standard-rated, with very limited exceptions. Zero-rating might apply to:
Works supplied to a charity for the benefit of people with disabilities – examples are the provision of wheelchair access, specially adapted bathrooms, etc. This is explained in Chapter C14. The building does not need to be RCP.
Some donated equipment for use in medical care, training, research etc by a charity, the NHS etc (see C14.8). Again, the building need not be RCP.
The construction of a building, or approved alterations to a listed building, where the contractor is acting in pursuance of a legally binding obligation entered into before 21 June 1988. This is under transitional rules dating from 1989, explained in E1.3.2.
3 Are the works the construction of a new building?
Chapter C3 looks at what this means. In particular it does not include work to an existing building, nor the construction of an extension, enlargement or annexe.
Yes The works are potentially zero-rated.
For dwellings, see Chapter C3.
For RRP and RCP buildings, see Chapter C7. There are further rules about the identity of the customer, who must certify the intended use of the building. In this case, zero-rating is not available for sub-contractors.
No Go to Question 4.
4 Does the work involve the extension or enlargement of a building to create a new dwelling or dwellings?
Yes The works are potentially zero-rated – see C3.4.1.
No Go to Question 5.
5 Does the work involve the construction of an annexe, solely for RCP use, to an existing building?
Yes The works are potentially zero-rated – see C7.4.3. In practice, it is difficult to qualify for the zero-rating. There are further rules about the identity of the customer, who must certify the intended use of the building. Zero-rating is not available for sub-contractors.
No Go to Question 6.
6 Is it a listed building or a scheduled monument?
C11.2 explains what this means.
Yes 'Approved alterations' are potentially zero-rated. This excludes repair and maintenance, and work that does not have – or require – listed building consent etc. This is explained in Chapter C11.
For RRP and RCP buildings, there are further rules about the identity of the customer, who must certify the intended use of the building. In this case, zero-rating is not available for sub-contractors.
Often works will only partly qualify as approved alterations. For works that do not qualify, go to Question 7.
No Go to Question 7.
7 Are the works for the benefit of people with disabilities, or mobility aids for older people?
This is explained in Chapter C14, but examples are the provision of wheelchair access, specially adapted bathrooms etc
Yes In some cases the works are potentially zero- or reduced-rated – see Chapter C14
No Go to Question 8.
8 Is the customer a housing association?
Yes The works are potentially zero-rated if they involve the conversion of a non-residential building to a dwelling or number of dwellings, or for RRP use. This is explained in C4.5 for dwellings and in C8.4 for RRP buildings.
No Go to Question 9.
9 Do the works involve any of the following:
A conversion to create a different number of single household dwellings? Examples can include a conversion of a house to flats or vice versa, or a conversion from commercial use to dwellings.
A conversion of a building to a multiple occupancy dwelling or dwellings, such as bed-sits?
Works to a dwelling that has been empty for two years or more?
These are explained in C4.2 and C4.3.
Yes The works are potentially reduced-rated – see Chapter C4.
No Go to Question 10.
10 Do the works involve either of the following:
A conversion of a building for RRP use?
Works to a RRP building that has been empty for two years or more?
Yes The works are potentially reduced-rated – see C8.2 and C8.3.
No Go to Question 11.
11 Are the works the installation of energy-saving materials?
Yes The works are potentially reduced-rated – see C15.2.
No Go to Question 12.
12 Are the works the grant-funded installation of heating or security devices?
Yes The works are potentially reduced-rated if they are in the home of someone aged over 60 or in receipt of certain benefits – see C15.3.
No Go to Question 13.
13 Are the works home improvements in the Isle of Man?
Yes The works are potentially reduced-rated – see C4.7.
No The works are standard-rated.