Commentary

RCB/2/17 VAT—care homes and hospitals

Part V16 Forms and other HMRC material

RCB/2/17 VAT—care homes and hospitals

RCB/2/17 VAT—care homes and hospitals

Revenue & Customs Brief, Issue 2. 28 July 2017

1 Purpose of this brief

This brief sets out HM Revenue and Customs (HMRC) revised policy on the VAT zero rate for new buildings intended for use solely for a relevant residential purpose as care homes. It explains the distinction between buildings used as care homes (and similar facilities) which are eligible for zero rating and hospitals which are not.

2 Who should read this Brief

All parties involved in the construction and supply of buildings that are designed as care homes and hospitals.

3 Background

The construction and first grant of an interest in a building, intended for use solely for a relevant residential purpose as a care home, is zero rated. A care home is one that provides residential accommodation with personal care to people in need of such care. Care may be needed because of:

  1.  

    —     old age;

  2.  

    —     disability;

  3.  

    —     past or present dependence on alcohol or drugs;

  4.  

    —     past or present mental disorder.

The construction of a hospital is standard rated. However, just because an institution is badged as a “hospital” doesn't necessarily exclude it from being treated as a care home. If the intended purpose of the building is to provide accommodation for the care detailed above, its construction may be zero rated.

There are two key areas of difference between care homes and hospitals:

HospitalsCare

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