Construction ― zero-rating of construction services

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Construction ― zero-rating of construction services
  • When can construction services for new buildings be zero-rated?
  • What is a ‘building’ for VAT purposes?
  • When are services supplied ‘in the course of construction’?
  • What kinds of supplies are specifically excluded from the zero-rating for construction services?
  • When is a certificate needed in order to zero-rate construction services?
  • When is a building used ‘solely’ for a relevant residential purpose or relevant charitable purpose?
  • Can zero-rating include the construction of garages?
  • What happens if only part of a building qualifies for zero-rating?
  • Practical points ― zero-rating of construction services

This guidance note looks at the zero rating of construction services for certain new buildings For an overview of the liability of construction services more broadly see the Overview construction conversion and renovation guidance note Detailed commentary on the legislation and case law can be found in De Voil Indirect Tax Service V4 238 When can construction services for new buildings be zero rated Businesses can zero rate supplies in the course of construction of the following kinds of new buildings buildings designed as dwellings see definition in the Buildings and construction definition of dwelling guidance note buildings which will be used solely for a relevant residential purpose see definition in the Buildings and construction definition of relevant residential purpose RRP guidance note buildings which will be used solely for a relevant charitable purpose see definition in the Buildings and construction definition of a relevant charitable purpose RCP guidance note VATA 1994 Sch 8 Group 5 Item 2 In some circumstances it will be necessary to hold a zero rating certificate in order to be entitled to zero rate the supply There are also a number of types of service which are specifically excluded from the zero rating for construction services This is explored further in this guidance note What is a building for VAT purposes The word building has not been defined in the legislation HMRC s view is that in the absence of a legal definition it should be given its natural meaning ie it is a structure it is fixed to the ground at a minimum it consists of walls or an alternative like an arrangement of columns the walls or their alternative support a roof that encloses a volume of space VCONST02220 The structure will also generally have sufficient scale for human occupation and be made of durable materials such as brick timber etc Structures like bridges and boats are not seen as buildings VCONST02220 Detailed commentary on case law which

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