Converting a non-residential building for a relevant housing association

By Tolley
VAT_tax_img

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

  • Converting a non-residential building for a relevant housing association
  • The conditions
  • Services that cannot be zero-rated
  • Used as a dwelling
  • 10-year rule
  • Mixed use developments

This guidance note provides an overview of the VAT treatment of the conversion of a non-residential property into residential accommodation.

The conditions

A business may be able to zero rate certain conversion work providing the following conditions are satisfied:

VATA 1994, Sch 8, Group 5, item 3; De Voil V4.234 (subscription sensitive); VCONST05000; HMRC Notice 708 
Condition 1 – supplied to a relevant housing association

In order for the conversion services to be zero-rated they must be supplied to one of the following:

VATA 1994, Sch 8, Group 5, Note 21
  • social landlord within the meaning of Housing Act 1996, Part I (subscription sensitive)
  • housing association that falls within the definition described in the Housing (Scotland) Act 2001 (Scottish housing associations) (subscription sensitive)
  • housing association that falls within the definition described in Housing (Northern Ireland) Order 1992, Part II (subscription sensitive)
  • a private registered provider of social housing

The business should ensure that it obtains a copy of the registration certificate evidencing that the housing association falls within one of the definitions described above.

Condition 2 – must be a non-residential conversion

If the building meets either of the following conditions, the conversion may be liable to VAT at the zero rate:

VCONST04400
  • the building that is to be converted has never been used as a dwelling, number of dwellings or a relevant residential purpose
  • in the 10 years immediately before the sale or grant of a long lease, the property has not been used as a dwelling, number of dwellings or for a relevant residential purpose

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