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HMRC internal manual

VAT Construction

From
HM Revenue & Customs
Updated
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Changing the use of certificated buildings - buildings completed before 1 March 2011: taxable charge - grants

Grant to a person who will use the building for non-qualifying purposes

If a person who received a relevant zero-rated supply subsequently sells or leases the building to somebody who does not intend to use the building solely for a relevant residential or relevant charitable purpose after a grant is made, then the grant is a taxable supply.

For lease (or sale) and lease-back (or lease-on) transactions, you should follow the same approach as at VCONST18300 to determine if the building will be used solely for a relevant residential or relevant charitable purpose.

Change of use or intention of the building after the grant has been made

A grant is not standard-rated when the recipient of the grant certifies that the building (or part) will be used solely for a relevant residential or relevant charitable purpose. If the person actually using the building subsequently changes his intentions, the liability of the grant is not revisited.

Note: If the grant qualified for the zero rate, the recipient may himself incur a charge (VCONST20600).

The relevant law

The relevant provisions were the Value Added Tax Act 1994, Schedule 10, Paragraph 36 prior to The Value Added Tax (Buildings and Land) Order 2011 (SI86/2011).