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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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Zero-rating the construction of buildings: apportionment

Qualifying parts of buildings

For guidance on apportionment for qualifying parts of buildings, check VCONST17000.

Services supplied in part in relation to the construction of a zero-rated building

In many construction projects it is likely that the services supplied will only in part qualify for zero-rating because they relate to both the construction of a zero-rated building and to something else. For example, an access road being constructed for developments that contain both zero-rated dwellings and commercial buildings.

In such cases an apportionment may be made. If an apportionment is not made, the supply is standard-rated.

The relevant law is the Value Added Tax Act 1994, Schedule 8, Group 5, Note 11.

The purpose of the note is to complement the apportionment provisions of Note 10.

Note 10 is limited to the apportionment of the building itself and does not offer any relief for services performed outside the building that serve the zero-rated building and other buildings or features.

Where such shared provision is supplied to serve both a zero-rated building and something else (for example, a new commercial building or an existing building), Note 11 provides for a suitable proportion of the charge to be zero-rated to reflect the connection to the construction of a zero-rated building.