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HMRC internal manual

VAT Construction

Zero-rating major interest grants in substantially reconstructed ‘protected buildings’: first major interest grant in, or in any part of, the building, dwelling or its site

For a building to be ‘substantially reconstructed’, the reconstruction must, at least, meet one of the two conditions in Note 4 to Group 6 when the reconstruction is complete (VCONST10320).

This means that the only person that can have ‘person substantially reconstructing’ status and can make a zero-rated supply is the person that is in the position to make a major interest grant in a substantially reconstructed protected building.

Developers that grant a major interest in the building before it has been substantially reconstructed can’t zero-rate the supply.

A purchasing developer that takes over the project, completes the substantial reconstruction and grants a major interest in the building can zero-rate the supply to the extent that it is a ‘protected building’.