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HMRC internal manual

VAT Construction

Changing the use of certificated buildings - buildings completed before 1 March 2011: relevant zero-rated supply

A charge can only arise if there has been a ‘relevant zero-rated supply’ of the property. This is a zero-rated supply that relates to a building intended for use for a relevant residential or charitable purpose. This was defined in the Value Added Tax Act 1994, Schedule 10, Paragraph 35 prior to The Value Added Tax (Buildings and Land) Order 2011 (SI86/2011) as a supply that has been zero-rated under the Value Added Tax Act 1994, Schedule 8, Group 5.

The zero-rated supply may be the:

  • construction of a building (VCONST02000)
  • first grant of a major interest in a building (VCONST03000)
  • first grant of a major interest in a converted non-residential building (VCONST04000)
  • conversion for a relevant housing association of a non-residential building (VCONST05000).

Note: A supply that has been zero-rated by application of ESC 3.29 (VCONST19000) isn’t a relevant zero-rated supply. A taxable charge won’t arise on a change of use of the building.