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

The following Tax practice 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 residential building
  • Why does zero-rating matter?
  • The conditions for zero-rating
  • What is a relevant residential purpose (RRP)?
  • Residential institutions
  • Students and the armed forces
  • Other categories
  • Solely
  • Certification
  • Penalty for incorrect certificate
  • More...

Zero-rated sales and leases—person constructing a relevant residential building

This Practice Note is about the VAT zero-rating for developers selling or leasing residential buildings, other than dwellings, that they have constructed. These are referred to as buildings for a ‘relevant residential purpose’ or RRP.

For information on the zero-rating of dwellings, see Practice Note: Zero-rated sales and leases—person constructing a dwelling.

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 RRP building, but this only applies where the work is commissioned by the end user, such as the operator of a care home. 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 residential … purpose … of a major interest in, or in any part of, the building, dwelling or its site.’

So

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