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HMRC internal manual

VAT Construction

HM Revenue & Customs
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‘Relevant residential purpose’ - interpretation of terms: relevant residential purpose - background: differences between ‘residential accommodation’ and ‘home or institution’

Broadly, the categories of relevant residential use are divided into two groups:

  • ‘residential accommodation’
  • ‘homes’, ‘institutions’ or ‘establishments’.

With ‘residential accommodation’, relief is limited to living space inclusive of leisure and recreational facilities (such as library, games room) and ancillary facilities (for example, storage, boiler room). ‘Residential accommodation’ may offer fewer or more amenities than those present in a dwelling, and can be simply overnight accommodation.

In Urdd Gobaith Cymru (VTD 14881), the Chairman examined what is meant by, ‘residential accommodation for students or school pupils’ and said:

I agree that ‘a residence’ clearly implies a building with a significant degree of permanence of occupation. However, such the word loses that clear meaning when used as an adjective. In ordinary English, ‘residential accommodation’ merely signifies lodging, sleeping or overnight accommodation. It doesn’t suggest the need for such accommodation to be for any fixed or minimum period.

At its barest, ‘residential accommodation’ can comprise simply of sleeping accommodation - Denman College (VTD 15513) refers. This must always be present before accepting that accommodation is ‘residential’.

Although the extent of the residential accommodation can be much broader, such as including kitchen and eating areas, such facilities aren’t residential accommodation when provided on their own.

In contrast, a ‘home or institution’ may consist of more than the residential accommodation, and can include recreational and occupational facilities and administration areas. For example, a residential care home for the elderly may include a hairdressing salon or a handicrafts room.

Thus, more can be relieved as a ‘home or institution’ than the residential accommodation because it is the home or institution that qualifies for relief and not simply its residential element.