HMRC has outlined a change in VAT policy to the treatment of dwellings that have been formed from either the construction of new buildings, or from the conversion of non-residential buildings
HMRC has outlined a change in policy to the treatment of dwellings that have been formed from either the construction of new buildings, or from the conversion of non-residential buildings into a dwelling.
In a policy paper, the tax authority said it now accepts that single dwellings can be formed from more than one building. A number of buildings may be combined to form a single dwelling as long as they are designed to function together for that purpose.
In order to be eligible for the zero-rate, the buildings must meet all the following:
Previously, HMRC had considered that while a building could contain more than one dwelling, a dwelling could not be formed from more than one building. This was because the law, Group 5 of Schedule 8 of the VAT Act 1994, consistently referred to ‘a building designed as a dwelling’, which HMRC considered precluded more than one building from constituting a dwelling.
However, it was decided in the First Tier Tribunal cases of Mark Catchpole and Mr T Fox that for the purpose of Group 5, it was appropriate to interpret the law as allowing the construction of dwellings formed from more than one building, to be eligible for zero-rating. HMRC, having accepted this decision, considers that it can, in principle apply to some conversions.
Those who have constructed or converted eligible buildings into new dwellings, consisting of more than one building that hasn’t previously been treated as zero-rated (for example, works of construction and eligible conversion services) may submit claims for overpaid VAT with retrospective effect up to 4 years from the date of the publication of this brief.