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VAT and sports pavilions

Does anyone know in what circumstances a builder cannot charge VAT when refurbishing a sports pavilion.

This is leased by the local parish council and sublet to a recreation ground association who wish to improve the facilities by amongst other things installing disabled access.I understand the latter will be exempt but how can the main contract be zero rated or vat exempt?


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If it is a refurbishment I believe that it will be standard rated - releifs only apply to rebuilding and new buildings.

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03rd Aug 2012 10:12


What basis is the subletting on, and who is paying for the work?

Is it the sports association or the parish council improving the building?

If the building is sublet on a peppercorn or similar basis then the income for the Parish Council is probably non-business and hence they are able to recover any VAT they incur on the building under Section 33 of the VAT Act 1994.

Unfortunately if the Sports Association is having the work done then the supply to them is likely to be taxable apart for any disabled adaptations which may be zero rated (not exempt), and they will be unable to recover it unless making taxable supplies.

If the Sports Association is paying the Council to do/organise the work for them then they may be able to benefit from the Council's tax status. There may be a possibility of seeing the income to the council as rental income (since the council have the headlease and are contracting for the works the supply of building works could be to the council and the only supply the association receive would be continued occupation, hence an exempt rental supply). Now normally VAT spent to generate exempt income wouldn't be recoverable unless deminimis rules apply under Partial Exemption.

A PC has slightly different deminimis rules in that for them the limit is just £625 on average per month rather than the normal rules of both being under £625 per month and under 50% of Input tax. So even if this is the only major cost for the council in the year then they may still be deminimis if they only have taxable spend up to £37,500 on the project within a tax year on the refurbishment.

Of course if you did go down this route then there's a possibility that HMRC could challenge and say that the income does relate to a supply of building works from the PC and hence they would need to register and charge VAT to the club, so contracts etc would need to be carefully set up, and unless the PC have a pet specialist they may be averse to entering into such transactions, but it is something to consider.

Other than the above there's nothing really to add in relation to the original post, the only reliefs available are on new build/rebuild for a charity or works for disabled access/washrooms.

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03rd Aug 2012 14:51

Unfortunately  £50000 of the

Unfortunately  £50000 of the funding is from the Lottery to the Association as are other grants so the PC cannot be seen to be paying from their own funds, which I'm told debars your approach


Thanks to both of you

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