Zero Rated VAT on New Building

Zero Rated VAT on New Building

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Hi,

I have a situation where a charity runs from a site on which there is the main building and a few outbuildings, all used for the charity's business.

The charity is looking to replace an existing outbuilding. It is constructing a new building, on site, which will be completely separate from all other buildings and self contained. Once completed it will demolish the old existing use outbuilding.

Will the construction of the new building be zero rated?
Can the demolishing of the existing building be zero rated?

Thanks in advance.

Replies (2)

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By spidersong
20th Oct 2014 15:08

What do you mean by replace?

Can we assume that the new building doesn't contain any element of the building to be demolished? And also that the demolition isn't required in order for the new building to be used or constructed?

If that's the case then the demolition is likely to be standard rated as it's not in the course of constructing a new zero rated building.

As to whether the new building will be zero rated, then that depends on what you mean by the 'charity's business'. Zero rating only applies to buildings for the non-business use of the charity i.e. used "otherwise than in the course or futherance of a business", or for buildings to be used as community facilities e.g village halls.

If it is non-business then zero rating can still apply to buildings that share sites so long as the buildings are capable of fullfilling their functions independently of any other buildings on the site. This is quite common with private schools, but there can be arguments about what constitutes independence e.g. HMRC have argued that a new school block doesn't qualify where the staff rooms and staff (or pupil) toilet facilities are in another building, and so the other building is required for the new building to carry out its normal function.

Basically before anyone can answer this you'll need to give more information on precisley what's happening.

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By The VAT Doctor
20th Oct 2014 22:42

Detail needed

Agree with spidersong, more details needed on the use of the new building.  I have looked at this  recently for a horse charity and, for example, the ZR relief may apply to stables constructed, entirely used to look after rescued horses.  The same can apply to sheds etc, the main issue is, are any 'business' activities being undertaken in the new building?

On the demolition, I would say SR on the basis it is not in the course of construction of the new building.

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