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HMRC internal manual

VAT Construction

HM Revenue & Customs
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Zero-rating major interest grants in buildings: premiums and other payments

Where a grant of a major interest is either a long lease or a tenancy agreement, zero-rating is restricted to the premium or the first rental payment made in respect of that grant. Subsequent payments are exempt.

The legal basis for this is the Value Added Tax Act 1994, Schedule 8, Group 5, Note 14.