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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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Zero-rating major interest grants in buildings: major interest grants: time share and other leases which are not continuous

When considering leases that are not for a continuous length of time, there are two factors that need to be considered, namely whether the lease is:

  • a ‘major interest’ grant
  • excluded from zero-rating by the ‘holiday home’ provisions (VCONST03400).

The lease is a ‘major interest’ grant when the sum of the interests making up the lease is equivalent to the grant of a major interest (that is it totals over 21 years or 20 or more years in Scotland).

In Cottage Holiday Associates Limited ([1983] STC 278), the High Court considered a time-sharing tenancy agreement. The appellant argued that an 80-year lease that provided for the right to occupy for one week each year was a major interest grant. The appeal was dismissed.