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HMRC internal manual

VAT Construction

Zero-rating major interest grants in buildings: the basic conditions for zero-rating major interest grants in buildings

The basic conditions for zero-rating the major interest grant in a building are set out in Notice 708 Buildings and construction. The legal basis for those conditions and where further guidance on their interpretation can be found is as follows:

Condition Relevant law (all references are to VATA 1994, Schedule 8, Group 5 unless otherwise stated) Guidance
1 - A grant of a major interest in the building is made Item 1(a).  
VATA 1994, Section 96 (definition of ‘major interest’) and Note 1 to Group 5. VCONST03200    
  2 - For tenancies, the payment is a premium or first payment of rent Note 14. VCONST03300
  3 - A building is being constructed Item 1(a)  
Notes 3, 5 and 16 to 18. VCONST02200      
  4 - The building is not a holiday home Note 13. VCONST03400  
  5 - The grantor has ‘person constructing’ status Item 1(a). VCONST03500  
  6 - The grant is the first major interest grant in the building Item 1(a). VCONST03200 and VCONST03700   
  7 - Where necessary, a valid certificate is held Note 12. VCONST18000