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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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Relevant charitable purpose concession (pre-1 July 2010 only): treatment of jointly-occupied buildings

In applying the concession methods you had to examine the use of the whole building. You weren’t to examine the space occupied by each organisation on its own merits or to apply differing concession methods to each organisation’s respective parts of the building. Consequently, should one of the parties have used their space for non-qualifying purposes, it would have had implications for the others.

Where the applicant was unable to collate information relating to the part it didn’t occupy, but which was relevant to the concession, you couldn’t give approval. In practice, this meant that either the applicant would be limited to only the time-based method for parts of a building or the occupiers would need to jointly agree which method suits their circumstances. Any application for a test relating to the entire building would require full disclosure of the intended use of the building by all the parties.

Examples 

Example 1

Charity A will let 50 per cent of its building to Charity B. Charity A’s part of the building is being used 100 per cent for a relevant charitable purpose.

Should Charity B use 16 per cent of their part of the building (8 per cent of the entire building) for business activity, under the floor space method, the building, as a whole, is treated as used solely for a relevant charitable purpose.

Example 2

As for example 1 but Charity B uses 30 per cent of its part of the building (15 per cent of the entire building) for business activity.

Under the floor space method, the building, as a whole, wouldn’t be treated as used solely for a relevant charitable purpose. However, Note (10) would enable Charity A to retain zero-rating for the part of the building that it uses solely for a relevant charitable purpose.

Example 3

As for example 2 but Charity A uses 10 per cent of the part of the building they occupy (5 per cent of the entire building) for a mixture of business and non-business activity.

Under the floor space method, the building, as a whole, wouldn’t be treated as used solely for a relevant charitable purpose. Charity A can’t use the floor space method to say that the part of the building they occupy is being used solely for a relevant charitable purpose. However, Charity A could apply the time-based method for parts of a building to the parts they occupy. Note (10) would then enable Charity A to retain zero-rating for the parts of the building that it uses solely for a relevant charitable purpose (that is, 90 per cent of their part of the building or 45 per cent of the whole building).

Similar principles can apply where the whole building is being let. If the letting is on a full-time basis, then only the lessee’s use need be considered. If the letting is on a part-time basis then both the lessor’s use and the lessee’s use will need to be considered.

Note: If the letting was on a part-time basis, with the lessor using the building solely for a qualifying purpose for at least 90 per cent of the time the building is available for use, then the time-based method would apply (VCONST19300).