This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

VAT Construction

Apportionment for part-qualifying buildings: what you can and can't apportion


There are two different approaches to adopt depending whether a zero-rated construction or conversion or a reduced-rated conversion or renovation is taking place.

Zero rate

Apportionment is only appropriate where an identifiable part of the building is being used for a qualifying purpose and the rest of the building isn’t. For example:

  • Flats constructed together with a new shop, when only the dwellings are zero-rated.
  • Part of a building used by a charity for non-business activities and a part for used for business activities.

Where part of a building is used for both qualifying and non-qualifying purposes, such as for a relevant charitable purpose in the morning and other purposes in the afternoon, then the building isn’t used solely for a qualifying purpose. However, minor amounts of non-qualifying use can be disregarded (VCONST18600).

Reduced rate

Apportionment is appropriate where not only qualifying buildings are being renovated or where not all the conversions being carried out result in qualifying buildings. For example, a block of flats being:

  • renovated where not all the flats satisfy the ‘empty home conditions’
  • converted to provide an increased number of flats but certain individual floors remain unchanged.

It isn’t necessary to identify qualifying and non-qualifying parts: a fair and reasonable apportionment can be agreed.