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HMRC internal manual

VAT Construction

‘Relevant residential purpose’ - interpretation of terms: category (b) - home or other institution providing residential accommodation with personal care

To qualify under this category all the following conditions must be met:

  • the accommodation must be ‘a home or other institution’ (VCONST15140)
  • the home or institution must be providing personal care (which will generally mean assistance with washing, eating, and so on but can also include such medical treatment as is necessary to contain a condition or to assist towards a person’s rehabilitation)
  • residents must require personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder.

Length of stay may help to decide whether an institution is a care home or a hospital.  The length of stay in a care home is likely to be longer than the length of stay in a hospital.  In a hospital there will be more emphasis on treating a patient in the shortest time possible whereas in a care home the treatment is a much longer process. For further information see VCONST15610.

Assisted living accommodation

Rather than choosing to live in the traditional type of old people’s home where they would have their own bedrooms and bathrooms but have communal dining rooms and lounges and carers close at hand, people can now live in managed ‘retirement villages’ where they buy or rent houses or flats, use shared facilities and buy in support services as and when they need them.

Assisted living accommodation is a type of ‘halfway house’ between the supported independent living of the retirement village and the dependency of a care or old people’s home. Typically, houses and flats are constructed in the grounds of care and old people’s homes enabling residents to make as much use of the home’s facilities as they wish.

Provision of such accommodation would only qualify for the zero rate where:

  • the Planning Permission provides for the construction of dwellings (C3 planning use) and the accommodation meets the criteria for buildings designed as dwellings or numbers of dwellings (VCONST14100).

or where:

  • the Planning Permission provides for the construction of a care home (C2 planning use) and the accommodation is constructed at the same time as the care or old people’s home in whose grounds the accommodation will be located.

Accommodation that is constructed in the grounds of existing care or old people’s homes under C2 planning use doesn’t qualify for the zero rate.