Commentary

V4.115A Land subject to an option to tax—exclusions from option (other than anti-avoidance)

Part V4 Exemption, zero-rating and reduced rates

V4.115A Land subject to an option to tax—exclusions from option (other than anti-avoidance)

V4.115A Land subject to an option to tax—exclusions from option (other than anti-avoidance)

Compulsory exclusions

Buildings designed or adapted, and intended, for use as dwellings/relevant residential purpose buildings1

An option has no effect (ie it does not convert an otherwise exempt supply into a standard-rated supply) in relation to any grant in relation to a building (or part thereof) which is designed or adapted, and is intended for use:

  1.  

    •     as a dwelling or number of dwellings, or

  2.  

    •     solely for a relevant residential purpose (RRP)

The expressions 'dwelling or number of dwellings' and 'relevant residential purpose' are to be read in accordance with the provisions of VATA 1994, Sch 8, Group 5, Notes 2 and 3, and Notes 4, 5 and 12 respectively2. This includes, in the case of an RRP building, the requirement for certification; see V4.231. HMRC accepts3 that, where the customer and supplier agree, the option to tax can be excluded on a building that is to be used 95% or more for a relevant residential purpose where a grant is made (a) in relation to a building designed solely for a relevant residential purpose, or (b) to a person who intends to use the building solely for a relevant residential purpose. This concession has not been included in Notice 742A; however, Notice 708 (November 2019) para 17.11 indicates that it still applies.

No formal evidence is required to support the disapplication of the option in such circumstances. But HMRC states4:

(in relation to dwellings) 'you [the supplier] should keep

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