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HMRC internal manual

VAT Construction

Changing the use or disposing of certificated buildings - buildings completed on or after 1 March 2011: what is a 'change in use'?

Normally, when considering, for VAT purposes, how an item is used, HMRC will regard the economic use to which it is put as determinative. However, in the case of the zero rate for qualifying buildings, it is the occupational or physical use of the building that determines whether or not it can be zero-rated and whether or not a ‘change in use’ has taken place.

Note: VAT legislation requires, for the purposes of zero-rating qualifying buildings, that where construction is concerned, the person receiving the supplies of construction services must be intending to use the building themselves solely for a qualifying purpose.

However, once the building has been zero-rated, if it is put to use for a non-qualifying purpose or the building is disposed of, a ‘change in use’ charge will arise.

For example, a ‘change in use’ charge would be required where all or part of the building is let to another person who uses it for a purpose other than a qualifying one - that is, solely for a relevant residential or relevant charitable purpose.

On the other hand, a ‘change in use’ charge wouldn’t apply where all or part of the building is let to someone who continues to use it solely for a qualifying purpose.

A ‘change of use’ charge also wouldn’t apply where use of all or part of the building changes from one qualifying use to another qualifying use.