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HMRC internal manual

VAT Construction

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Reduced-rating the renovation or alteration of empty residential premises: what ‘qualifying residential premises’ means: premises to be used for a ‘relevant residential purpose’

The reduced rate applies to the renovation or alteration of premises that will be used for a ‘relevant residential purpose’.

VCONST15000 explains what we mean by ‘relevant residential purpose’.

Here, the focus is on whether the premises, which is the whole building, is renovated or altered. Also, because establishments that are being used for a relevant residential purpose are often housed in more than one building and may be renovated in stages, there are special rules to cover this scenario.

Paragraph 2 to the notes defines the ‘before’ position as follows:

  • Paragraph 2(1) - The building (or part of it) must have previously been used for a relevant residential purpose. It need not have been used solely for that purpose
  • Paragraphs 2(2) and 2(4) - If, for example two buildings together form a care home, then neither of them is a care home in its own right. Therefore neither is being used for a relevant residential purpose and, under paragraph 2(1), they are not qualifying residential premises. However, the effect of paragraphs 2(2) and 2(4) is to treat each of such buildings as if they were used for a relevant residential purpose in their own right. They are therefore qualifying residential premises. If a number of buildings on the same site are used together for a relevant residential purpose then each building may not, in itself, be used for a relevant residential purpose.

Paragraph 4A to the notes defines the ‘after’ position (VCONST07530).