VAT information sheet 07/17: construction services and zero-rated relief
This information sheet outlines when the construction of a dwelling or a building constructed for a relevant residential purpose or relevant charitable purpose on a site previously occupied by another premises, can be zero-rated. It has been released to update/reinforce their policy following 3 tribunal decisions. The information sheet defines some key terms which are vital for determining whether the building is constructed, altered or extended which in turn determines whether the construction qualifies for zero rating. For example HMRC will now allow for a very minor part of a building to be retained above ground level if it’s small enough to be ignored as ‘de minimis’. The information sheet also defines what HMRC will accept as a façade and the evidence required that facades are being retained as a condition or requirement of statutory planning consent.
The final point in the information sheet relates to the construction of buildings that incorporate existing buildings. HMRC accepts that in order to establish whether a building is being constructed the nature of the work needs to be taken into account. The retention of a minimal amount of an already existing building will be sufficient to disqualify the work from zero-rated relief, however the incorporation of an entire building into a development may qualify if the works are so extensive that they can’t be described as works of alteration but are to be as the construction of a building. Where the size of the addition to the existing building greatly exceeds the original building and the function changes HMRC is prepared to accept that such works are entitled to be zero-rated.
Any business in the construction industry should take the time to read this information sheet.
For further information please contact Alison Birch below:
Written April 2018.