Commentary

V3.248 Change of use of relevant charitable or residential building

Part V3 Supplies, acquisitions and imports

V3.248 Change of use of relevant charitable or residential building

V3.248 Change of use of relevant charitable or residential building

A person intending to use a building solely for a relevant residential purpose1 or a relevant charitable purpose2 receives a supply zero-rated under VATA 1994, Sch 8, Group 5 (construction of buildings) if, having been given the required certificate3:

  1.  

    (1)     the person constructing the building grants the fee simple or a lease for a term exceeding 21 years to him4, or

  2.  

    (2)     a building contractor constructs the building on land in which the person has a freehold, lease or licence5.

The supply made in either situation is referred to as a 'relevant zero-rated supply'6.

A charge to tax arises if the building ceases to be used for a relevant residential or charitable purpose in the circumstances set out below. It should be noted that this charge is confined to recipients of a relevant zero-rated supply. No charge to tax arises if the supply was zero-rated under VATA 1994, Sch 8, Group 6 (protected buildings)7 or if a refund of tax was received under VATA 1994, s 35 (DIY builders scheme)8.

Prior to 1 March 2011, the charge to tax arose in two forms:

  1.  

    –     where the change of use took the form of the grant of an interest in, right over, or licence to occupy the building in question, the grant was standard-rated (see V4.113A)

  2.  

    –     where the change of use took the form of a variation in the extent to which the building was used for a relevant residential or relevant charitable

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