V16.1022 VAT on buildings that are dwellings and used for a relevant residential purpose
Information Sheet 2/14, January 2014
What is this information sheet about?
This Information Sheet provides guidance on the application of the zero-rate for VAT on buildings that are designed as a dwelling or dwellings (meeting the conditions of VATA 1994 Sch 8 Group 5 Note 2) and are intended for use as a building used for a relevant residential purpose (RRP) (meeting the conditions of VATA 1994 Sch 8 Group 5 Note 4).
This Information Sheet updates the relevant sections of Notice 708 and Manual VCONST.
Can a relevant residential purpose building also be treated as dwellings?
For the vast majority of buildings potentially eligible for zero-rating, you will know from the outset whether you are constructing or purchasing a new building that is designed as a dwelling or is intended to be used solely for a relevant residential purpose (RRP). However, since the zero-rate for dwellings is based on the design of the building and for RRPs based upon its use, HMRC accept that there may be instances where a building could qualify for zero-rating under both of these provisions at the same time. In such cases, a taxpayer is free to rely on either provision to achieve zero-rating for their building.
For example, if a building is intended to be used solely for a RRP but also meets all the conditions of VATA 1994 Sch 8 Group 5 Note 2 (in that it takes the form of a building designed