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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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Dwellings - an explanation of terms: what ‘designed as a dwelling or number of dwellings’ means: live-work units

A live-work unit is a property that combines a dwelling with commercial or industrial working space within a single unit as a requirement or condition of planning permission.

Because of the above condition or requirement, it often isn’t possible to use or dispose of the dwelling separately from the working space. As a result, a live-work unit isn’t eligible for the zero rate. Paul Cussins (VTD 20541) refers.

If there is no prohibition on separate use or separate disposal, the live-work unit is eligible for the zero rate but only to the extent of the area designated for the dwelling. VCONST17000 on apportionment refers.

If there is no designated working area or if the area’s use as working space isn’t stipulated by planning requirements, the working space is seen as part of the dwelling and the entire live-work unit is eligible for the zero rate.