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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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‘Approved alteration’ of a ‘protected building’ (changes introduced on 1 October 2012): Changes

With effect from 1 October 2012 changes were made to the legislation (Group 6 of Schedule 8 of the Value Added Tax Act 1994).

The purpose of these changes was to remove the anomaly whereby the approved alteration of protected building was zero-rated but their repair and maintenance (and the alteration of other types of building) was standard-rated. The VAT treatment of approved alteration to protected buildings has been a source of major confusion, resulting in a high volume of taxpayer query and frequent error. These changes remove the need to try to distinguish between alteration and repair or maintenance, and remove the incentive to alter, rather than repair, listed buildings.

The changes to the legislation

Group 6 of the Value Added Tax Act 1994 has been amended to remove zero-rating

1] from approved alterations as follows:

Item 2: the supply in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity; and

Item 3: The supply of building materials to a person to whom the supplier is supplying services within item 2 of this Group which include the incorporation of the building materials into the building (or its site) in question;

and;

2] from the first grant of a major interest in a ‘substantially reconstructed building’ in those situations where the zero-rating relied on 3/5ths of the work being undertaken consisted of approved alterations.