Sale or grant of a long lease ― zero-rating for protected buildings

By Tolley
Sale or grant of a long lease ― zero-rating for protected buildings

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

  • Sale or grant of a long lease ― zero-rating for protected buildings
  • When can the sale / grant of a lease in a protected building be zero-rated?
  • What is a ‘protected building’?
  • When is a building ‘substantially reconstructed’?
  • Is there a grant of a ‘major interest’?
  • Is the grant the first grant of a major interest?
  • Does the person making the grant have ‘person substantially reconstructing status’?
  • When is a building a holiday home?
  • What is the special rule for tenancies?
  • When is a certificate required in order to zero-rate the sale / grant of a lease?
  • What happens if only part of a building qualifies for zero-rating?
  • How do the rules apply to land and garages?
  • Practical points ― sales and leases in protected buildings

This guidance note provides an overview of the VAT treatment of the sale or grant of a long lease in a protected building.

For an overview of the liability of supplies of land more broadly, see the Overview of VAT and property issues guidance note.

Detailed commentary on legislation and case law can be found in De Voil Indirect Tax Service V4.232C and V4.235.

When can the sale / grant of a lease in a protected building be zero-rated?

Zero-rating can apply to the sale or grant of a lease where the following conditions are met:

  • work is carried out on a ‘protected building’
  • the protected building is ‘substantially reconstructed’
  • there is a grant of a ‘major interest’ in the building
  • the grant is the first grant of a major interest
  • the person making the grant has ‘person substantially reconstructing status’
  • the building is not a ‘holiday home’
  • if the grant is a tenancy, the payment is a premium or the first payment of rent
  • if appropriate, a zero-rating certificate has been issued to the supplier

VATA 1994, Sch 8, Group 5, Notes 13, 14, Group 6; VCONST10100; Notice 708 , para 10.2.2

What is a ‘protected building’?

A ‘protected building’ is a building which is either:

  • a listed building
  • a scheduled monument

In addition, after reconstruction work it must either:

  • be designed to remain as or become a dwelling
  • be used solely for a ‘relevant residential purpose’
  • be used solely for a ‘relevant charitable purpose’

VATA 1994, Sch 8, Group 6, Note 1

More on Supplies of land and property: