Hi there,
A client who has some woodlands has been asked to use some of his timber to build a log cabin for a customer for use as a dwelling including perhaps letting it as a holiday home. Most log cabins have VAT added to the cost because they are primarily simply a garden addition, but this will be a large log cabin suitable as a home. The likely sale proceeds will be in excess of £100k so the VAT position is a material issue. Is our client safe to zero-rate the sale and are there any hoops to go through (e.g. certificates to obtain) to avoid any comebacks from HMRC.
Many thanks in advance for readers' help.
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Planning permission
The first grant of a major interest in a building designed as a dwelling by the person constructing it and the supply of construction services during the course of construction of a building designed as a dwelling are zero-rated.
A building is designed as a dwelling or a number of dwellings where in relation to each dwelling the following conditions are satisfied—
(a) the dwelling consists of self-contained living accommodation;
(b) there is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling;
(c) the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision; and
(d) statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent.
Per VAT Notice 708, you don't need any certificate for a dwelling, so broadly, if there's planning permission (which is presumably required), it would appear to be eligible for zero-rating.
But if you intend to make taxable supplies of the building?
That could cause a problem I would say.