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HMRC internal manual

VAT Construction

From
HM Revenue & Customs
Updated
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Changing the use or disposing of certificated buildings - buildings completed on or after 1 March 2011: change in the VAT rate

If the standard rate of VAT at the time the building or construction services is different to the one at the time a self-supply is due, you need to ensure that your calculation is adjusted to reflect the VAT that would have been charged at the time the building or construction services were supplied.

For example, using the example in VCONST21600, if the standard rate of VAT at the time that the construction services were supplied was 17.5 per cent and a ‘change in use’ charge is due when the VAT rate is 20 per cent, the VAT due on the self supply is as follows:

  • Proportion of the building affected by the change equals one floor out of five - that is, 20 per cent.
  • VAT that would have been due at the time is £5 million multiplied by 17.5 per cent equalling £875,000.
  • The value of supply or supplies that would have been chargeable at 20 per cent VAT to yield £875,000 VAT equals £4.375 million.
  • Number of months remaining in the 10-year period that this part of the building won’t be used as intended equals 60 months out of 120 - that is, 50 per cent.

Therefore the value of the self supply is £4.375 million multiplied by 20 per cent multiplied by 50 per cent equalling £437,500.

VAT at 20 per cent is £437,500 multiplied by 20 per cent equalling £87,500.