News
VAT: zero rating for relevant charitable or residential buildings - 2010-06-28
From 1 July 2010, Extra Statutory Concession (ESC) 3.29, concerning the zero-rating of buildings to be used for a relevant charitable or residential use, will be withdrawn. From 1 July 2010 the zero-rating will now only be available for the construction of, and the acquisition of, a building intended for use for a relevant charitable purpose providing it satisfies the "solely" requirement of the statutory legislation. "Solely" will be interpreted as meaning the building must be used 95% or more (currently 90%) for a relevant residential or relevant charitable purpose.
With the new interpretation, any method may be used to calculate qualifying use of a building, so long as it is fair. HMRC considers any calculation to be 'fair' provided that it accurately reflects the extent that the building is used for a qualifying purpose, and it can be carried out and checked without undue difficulty or cost.
'Fair' methods accepted by HMRC include the following:
- time-based method
- headcount based method
- floor space based method
Of course, this list of methods of calculation is not exhaustive; other comparison methods can be used providing they fairly reflect the intended use of the building.
Zero-rating is conditional upon the building in question continuing to be used at least 95% for a qualifying purpose for the 10 years following completion. Should the use of the building (or a part) change from a qualifying purpose within that 10 year period a standard rated charge will arise.
For further information please contact Indirect Tax Partner Bob Jones on 020 7516 2295 or email
