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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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‘Relevant residential purpose’ - interpretation of terms: category (d) - residential accommodation for students or school pupils: including accommodation designed as dwellings, cluster flats and studio flats

Newly constructed student accommodation may take more than one form.

  • The type of accommodation referred to in VCONST15360 (which might be characterised as communal living with shared facilities in a large building); or
  • Where the accommodation may have been ‘designed as a dwelling’ such as a flat, ‘cluster flat’ or studio flat.

The term ‘cluster flat’ refers to a type of arrangement where a collection of study bedrooms are arranged around a communal kitchen or dining area. Toilet and washing facilities may be communal or en suite.

A studio flat is one which also has a study bedroom but possesses its own kitchen or dining space together with toilet and washing facilities.

We now accept that buildings containing these flats may satisfy the conditions for zero-rating as being both:

  • intended for use solely for a relevant residential purpose [Note (4) of Group 5 to Schedule 8]; and also
  • designed as a dwelling or number of dwellings [Note (2) of Group 5 to Schedule 8].

Where this occurs a developer may rely on either provision to secure zero-rated relief. However, there are different VAT implications for each. For example, if a developer has relied on Note (4) there may be a change of use charge (a self-supply) if its use or ownership changes within 10 years. There are other implications which are explained in detail in Section 15 of Notice 708 Buildings and construction