Value Added Tax

Buildings and construction ― definition of dwelling

Produced by Tolley
  • 22 Dec 2021 18:45

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

  • Buildings and construction ― definition of dwelling
  • When is a building designed as a dwelling?
  • What is self-contained living accommodation?
  • What is direct internal access?
  • When is separate use or disposal of a dwelling prohibited?
  • Occupancy restrictions
  • When is construction / conversion carried out in accordance with statutory planning consent?
  • Can a building be a dwelling and used for relevant residential purposes?
  • Practical points ― buildings designed as dwellings

Buildings and construction ― definition of dwelling

This guidance note looks at when a building is ‘designed as a dwelling or a number of dwellings’ for VAT purposes.

Detailed discussion of the legislation and case law on dwellings can be found in De Voil Indirect Tax Service V4.232BA.

When is a building designed as a dwelling?

There are four key conditions that need to be met for a building to be considered to be ‘designed as a dwelling’ for VAT purposes:

  1. it must have self-contained living accommodation

  2. there must be no direct internal access between other dwellings or parts of a other dwellings

  3. there must be no covenants, statutory planning consent or similar provisions which prevent the separate use or disposal of the dwelling

  4. the construction / conversion must be carried out in accordance with statutory planning consent

VATA 1994, Sch 8, Group 5, Note 2

These conditions are explored further in this guidance note.

What is self-contained living accommodation?

For a building to have self-contained living accommodation, it must have the basic elements of living so HMRC expects to see the following at a minimum:

  1. kitchen

  2. bathroom

  3. sleeping area

  4. living area

Notice 708, para 15.3.1

These might not all be in their own rooms and could be spread over two rooms like in a studio flat.

In fact, HMRC accepts that the elements may even be spread over a combination of separate buildings. This is provided the buildings are designed to function together for that purpose and are constructed or converted under a single project and single planning

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