Zero-rated sales and leases—person constructing a relevant charitable building
Produced in partnership with Martin Scammell
Zero-rated sales and leases—person constructing a relevant charitable building

The following Tax guidance note Produced in partnership with Martin Scammell provides comprehensive and up to date legal information covering:

  • Zero-rated sales and leases—person constructing a relevant charitable building
  • Why does zero-rating matter?
  • The conditions for zero-rating
  • What is a relevant charitable purpose (RCP)?
  • Person constructing
  • Construction
  • First grant of a major interest
  • Grounds and outbuildings
  • Furniture, carpets and white goods
  • Input tax and the capital goods scheme
  • more

This Practice Note is about the VAT zero-rating for developers selling or leasing certain buildings, intended for use by charities, that they have constructed. These are referred to as buildings for a relevant charitable purpose (RCP).

Why does zero-rating matter?

If the zero-rating does not apply, the transaction will usually be exempt, so that the developer cannot recover VAT (ie input tax) on costs, such as on the construction of the building, fees and perhaps on the acquisition of the site. For more details, see Practice Note: When can a person recover VAT?

There is also zero-rating for the construction of an RCP building, but this only applies where the work is commissioned by the charity using the building (see Practice Note: VAT treatment of building work). The zero-rating covered by this Practice Note is an alternative to this; someone constructing such a building for use by others will incur VAT on the construction costs, but can recover it through a zero-rated sale or lease.

The conditions for zero-rating

The zero-rating covers:

‘The first grant by a person constructing a building…intended for use solely for…a relevant charitable purpose…of a major interest in, or in any part of, the building, dwelling or its site.’

So the zero-rating depends on:

  1. the building being intended solely for a relevant charitable purpose

  2. the grantor being ‘a