Land and Buildings
For VAT purposes, transactions involving land and buildings can be –
The status is, in the main, dependent upon
(a) Type or supply, and
(b) Type of building
Other factors are relevant, but not discussed at this stage.
Zero rating for L&Bs is outlined in VATA 1994 Schedule 8 Group 5 ‘Construction of Buildings, etc’ and Group 6 ‘Protected Buildings’.
Requirements for Zero Rating:
- Construction, 1st grant and major interest, and
- Either dwelling, relevant residential purpose (RRP), or
- Relevant charitable purpose (RCP)
Examples of buildings which would be Zero Rated
Student residences are deemed RRP, and therefore ZR would apply, assuming other requirements on type of supply (above) are also met.
A building used for publicly funded research, which is a ‘non business’ activity, is deemed RCP, and therefore ZR would apply, assuming other requirements on type of supply (above) are also met.
By concession, if a building is 95% used for publicly funded research, the whole building can be deemed RCP and therefore ZR applies to the whole building.
In addition to the above,
grant, after conversion from non-residential to a dwelling, RRP or RCP, will be
zero rated, and
(ii) First grant, by person substantially reconstructing a protected building will be zero rated
To qualify for ZR on RRP and RCP, the customer needs to supply the builder with a zero rating certificate, specifying intended use.
Where part of the building qualifies for ZR and part does not (eg. publicly funded research, and teaching), an apportionment needs to be to determine the extent to which ZR applies.
CONSTRUCTION AND OTHER SUPPLIES OF LAND AND BUILDINGS
Exempt supply of L&Bs is outlined in VATA 1994 Schedule 9 Group 1 ‘Land’.
The legislation states that, the grant of any interest in, or right over land, or of any licence to occupy
land is EXEMPT, OTHER THAN THOSE ITEMS IDENTIFIED AS ZERO
RATED (ABOVE) OR STANDARD RATED (BELOW).
Rental income is generally exempt from VAT, although a landlord may ‘opt to tax’ a property, and would therefore charge VAT on rents, from non-domestic property. Option to tax is discussed further below.
The following are included in the legislation, specifically, as SR supplies of L&Bs:
of a freehold in a commercial building which has not been completed, or a new
commercial building (< 3 years old)
Note. A commercial building will be one which is not a dwelling, RRP or RCP, and is otherwise referred to as a non-qualifying building. Teaching is deemed a business activity, and therefore does not qualify as a RCP. As such, acquiring the freehold of a new building to be used for teaching will be standard rated.
- Accommodation in a hotel
- Car parking
- Seat at a sports ground, theatre, concert hall or other place of entertainment (unless supply is made by specific non-profit making bodies, in which case exempt)
Building services related to refurbishment or renovation are standard rated supplies, and as a result VAT will be charged by the contractor. Unless an ‘option to tax’ has been taken on the property, VAT charged by the contractor will be irrecoverable by the University.