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VAT zero-rating for charity building accessibility

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Charities can enjoy some VAT relief on certain accessibility works in a building that they own or occupy. Les Howard explores the scope of zero-rating.

29th Sep 2023
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Many buildings require access for disabled persons to be facilitated. VAT legislation provides a number of reliefs. These are simple cost savings, with minimum administration. One essential criteria is that the recipient organisation is a charity. VAT Act 1994, Sch 8, Group 12 provides for this zero-rating. Zero-rating applies to works to an existing building. Where a charity is constructing a new “relevant charitable purpose” building, zero-rating will include these works under the provisions of Group 5.

Charity trustees should ensure that suitable advice is obtained so as to identify and maximise reliefs.

It is important that the charity agrees the extent of zero-rating with the contractor at an early stage. Ask the contractor what evidence they require too.

Ramps, corridors, doorways

Zero-rating applies to the construction of a ramp to allow entry into a building or movement within a building. This means the ramp may be outside, at an entrance or within the building. However, neither the change of the gradient of a ramp nor the levelling of an existing ramp can be zero-rated.

Zero-rating applies to the widening of doorways or corridors to allow access.  There must be an existing doorway or corridor as appropriate. So, for example, the creation of a new doorway that is wider than usual would not be zero-rated under this provision.

Accessible toilets, washrooms, bathrooms

Zero-rating applies to works to a bathroom, washroom or lavatory designed to be used by disabled persons. Note 5K defines a washroom as a room that contains a lavatory or washbasin or both, but not a room containing either a bath or shower. HMRC defines a bathroom as a room including a shower or wet room; a lavatory is a room containing a toilet and possibly a washbasin.

Item 11 covers works where the room is to be used by disabled persons in a residential or daycare centre. It includes a bathroom, washroom or lavatory. Item 12 applies more broadly and covers works where the building or part of the building is to be used by the charity principally for its charitable activities. This includes a washroom or lavatory but not a bathroom. HMRC makes this distinction in VRDP11800.

Zero-rating applies to the creation of a new facility. It also applies to works to extend or adapt an existing facility. 

VRDP11550 addresses the concept known as “lost space”. This is where a room size is reduced when alterations are made. Urging a “sensible approach”, HMRC says that zero-rating applies to works to restore lost space within a private customer’s private residence. Presumably they will also apply the same approach in a building being used by a charity.

Lifts

Annoyingly, zero-rating is not so available as we would hope when a charity has a lift installed. Charity trustees should not assume that zero-rating is available.

HMRC refers to “shaft lifts”, as opposed to chair lifts and stair lifts. This is a helpful distinction.

A charity can enjoy zero-rating for the supply of a chair lift or stair lift where it will be used by a named disabled individual. This arrangement will apply, for example, when a social housing provider or other charity requests installation for a particular individual in residential accommodation. The charity must obtain adequate evidence of the recipient’s eligibility for the item.

In all other cases, in relation to the installation of so-called “shaft lifts”, there are two options:

  1. where the building includes a day centre, or
  2. a permanent or temporary residential centre for disabled persons.

Zero-rating does not apply to the installation of a shift lift in a charity building more generally. In the Union of Students of the University of Warwick (VTD 13821) the tribunal held that it was insufficient that a lift was installed to allow disabled students to access upper floors. “The lift was installed for the purpose of enabling disabled students to have access to the building and it was used principally by disabled students.” Even so, zero-rating did not apply.

If zero-rating is applicable for installation, any subsequent works of repair and maintenance are also zero-rated.

Goods or services

I would expect that, in order to be eligible for zero-rating, goods must be supplied as part of a supply of construction services. Item 13 refers to supplies relating to ramps, doorways, passages, bathrooms and washrooms, allowing zero-rating for “the supply of goods in connection with” such services. I would assume this refers to goods installed within the supply of construction services, akin to Item 4 to zero-rate Group 5.

However, HMRC guidance at VRDP11000 refers to the tax tribunal case of Gary Flather (VTD 11960). The tribunal allowed an appeal such that zero-rating was applied to goods purchased directly from the builders’ merchants by the claimant at the same time the contractor was carrying out the construction services.

HMRC says it will allow zero-rating in such circumstances. This will be helpful if the contractor is not registered for VAT, as the recipient will still enjoy zero-rate relief.

Personally, I would be cautious at seeking such relief. The VAT and duties tribunal decision is not binding, and, in my opinion, this represents an unusual interpretation of the legislation.

Other works and apportionment

Where you are eligible to zero-rating as described, any works that are preparatory or making good are also zero-rated.

However, it is likely that, if you are eligible for zero-rating for some works as described above, there will be other works that must be standard-rated.

And, some works will relate to both zero-rated and standard-rated works, for example, preliminaries, site clearance. You should ask the building contractor to apportion these works between zero-rated and standard-rated using a simple percentage.

Ideally the charity will agree at an early stage with the contractor the extent of zero-rating.

Certification and evidence

VAT legislation does not explicitly require a recipient charity to provide a formal zero-rating certificate to the building contractor. HMRC guidance does suggest that some evidence be provided.

Ask the contractor at an early stage what form of evidence is required.

In the event of an HMRC enquiry, the claimant charity should hold copies of architectural drawings and planning permission. These are business records, which are required to be retained for six years.

References

As mentioned in the introduction, zero-rating is provided for accessibility works under VAT Act 1994, Sch 5, Group 12. HMRC Notice 701/7, chapter 6 contains guidance. And you can find further guidance in the HMRC VAT manuals at VRDP11000.

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By Halex
08th Oct 2023 15:00

Thank you for posting this article - very relevant and raises a warning flag to those who might think charity VAT simple. As in all things charity finance - it never seems to be anything like as straight forward as you would hope.

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