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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’: delays between completion and the major interest grant

The Court of Session judgment in Link Housing Association Ltd ([1992] STC 718) has confirmed that zero-rating is not affected by delays between completion of construction and the making of the major interest grant. They stated:

The phrase ‘a person constructing a building’ means not only ‘a person who is still in the course of constructing a building’ but also ‘a person who is simply the constructor of the building’.

Consequently, if a developer makes a short lease in a building prior to making his first major interest grant in it, the major interest grant can be zero-rated. However, there may be partial exemption implications. For more information, check the Partial Exemption Guidance.