Conversion ― reduced-rating conversions to different residential use

Produced by Tolley

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

  • Conversion ― reduced-rating conversions to different residential use
  • When can conversion works be reduced-rated?
  • What is a ‘qualifying conversion’?
  • What is a changed number of dwellings conversion?
  • What is a single household dwelling in this context?
  • Examples of changed number of dwellings conversions
  • Examples which are not changed number of dwellings conversions
  • What is a house in multiple occupation conversion?
  • What is a house in multiple occupation in this context?
  • What is a relevant residential purpose in this context?
  • More...

Conversion ― reduced-rating conversions to different residential use

This guidance note explains when works in converting premises to different residential use can qualify for the reduced rate of VAT.

For an overview of the liability of construction services more broadly, see the Construction ― zero-rating of construction services guidance note.

In-depth commentary on the legislation and case law around reduced-rated conversions is found in De Voil Indirect Tax Service V4.411.

When can conversion works be reduced-rated?

Conversion works will generally never qualify for the zero-rate of VAT (see the Construction ― conversion, reconstruction and alteration of existing buildings guidance note) with the exception of certain conversion works supplied to housing associations (see the Conversion ― zero-rating non-residential conversions (housing associations) guidance note).

However, some conversion works can qualify for the reduced rate of VAT, provided the following conditions are met:

  1. the conversion is a ‘qualifying conversion’

  2. the services are ‘qualifying services’

  3. the services are supplied ‘in the course of conversion’

  4. if appropriate, a valid certificate is held

  5. if appropriate, planning consent / building control approval has been obtained

VATA 1994, Sch 7A, Group 6, Item 1

These conditions are explored further in this guidance note.

What is a ‘qualifying conversion’?

There are three different types of qualifying conversion:

  1. a changed number of dwellings conversion

  2. a house in multiple occupation conversion

  3. a special residential conversion

VATA 1994, Sch 7A, Group 6, Note 2

Each type of conversion is described in turn below.

What is a changed number of dwellings conversion?

A changed number of dwellings conversion takes place when:

  1. a building (or part of a building) is converted

  2. after conversion, the building (or the part of a building) contains a greater or lower number of single household dwellings

  3. after conversion, there is at least one single household dwelling

VATA 1994, Sch 7A, Group 6, Note 3

This may seem like a convoluted rule, but essentially the number of single household dwellings cannot be the same before and after conversion, and at the end of the conversion, there must be at least

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