Sale or grant of a long lease ― zero-rating for newly converted buildings

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

  • Sale or grant of a long lease ― zero-rating for newly converted buildings
  • When can the sale / grant of a lease in newly converted buildings be zero-rated?
  • What is a ‘non-residential conversion’?
  • Is there a grant of a ‘major interest’?
  • Is the grant the first grant of a major interest?
  • Does the person making the grant have ‘person converting status’?
  • When is a building a holiday home?
  • What is the special rule for tenancies?
  • When is a certificate required in order to zero-rate the sale / grant of a lease?
  • What happens if only part of a building qualifies for zero-rating?
  • How do the rules apply to land, garages and partly converted buildings?
  • Practical points ― selling / granting leases in newly converted buildings

This guidance note sets out when zero rating can apply to the sale or grant of a long lease in newly converted buildings For an overview of the liability of supplies of land more broadly see the Overview of VAT and property issues guidance note Detailed commentary on the legislation and case law can be found in De Voil Indirect Tax Service V4 234 When can the sale grant of a lease in newly converted buildings be zero rated Zero rating can apply where the following conditions are met the building is the subject of a non residential conversion there is a grant of a major interest the grant is the first grant of a major interest following the conversion the person making the grant has person converting status the building is not a holiday home if the grant is a tenancy the payment is a premium or the first payment of rent if appropriate a zero rating certificate has been issued to the supplier VCONST04100 VATA 1994 Sch 8 Group 5 These conditions are considered further in this guidance note What is a non residential conversion A non residential conversion occurs when the conversion is of a building or part of a building which either has never been used as a dwelling or number of dwellings or for a relevant residential purpose RRP before conversion in the 10 years before the sale grant of a lease has not been used as a dwelling or number of dwellings or for an RRP and is at least 10 years old at the time of the sale grant In addition after conversion the building must be converted into a building or part of a building which is either designed as a dwelling or number of dwellings intended for use solely for n RRP VATA 1994 Sch 8 Group 5 Item 1 b Note 7 Dwellings Non residential conversions can be particularly confusing when it comes to dwellings

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