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HMRC internal manual

VAT Construction

HM Revenue & Customs
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Zero-rating major interest grants in buildings: ‘person constructing a building’: selling and finishing partially constructed buildings

The sale of a partly constructed building can be a grant by a ‘person constructing a building’. This has been confirmed in the case of Stapenhill Developments Limited (VTD 1593), where the Tribunal stated:

We do not consider that item 1… requires a completed building to be upon the land. The operative word is ‘constructing’ and not ‘a person who has constructed’. The question is nevertheless to be decided as a matter of substance and degree whether or not on the facts of the case what has been done on the land is sufficient to bring the work within the ambit of the expression [‘person constructing a building’].

It is accepted that a building is being constructed when work has progressed above foundation level. This is usually when walls begin to be constructed upon the foundations. These walls need not be above ground level. However, simply digging and concreting foundations is not sufficient and in such cases the grant of a major interest in the land is not zero-rated (VCONST03530).

When a partly completed building is sold the purchaser may decide to continue the construction of the building and so become a ‘person constructing a building’ in their own right. They will then be able to zero-rate their first major interest grant in the property.