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HMRC internal manual

VAT Education Manual

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HM Revenue & Customs
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Construction; land and property

VAT liability of construction, land and property supplies

Building work

Most building work is standard-rated. The following table, however, provides a broad overview of works for educational establishments that can be zero-rated or reduced-rated:

Where the work is the … and after the work the building will be used solely … then the work is …
construction of a new building; or    
carrying out of an approved alteration to a listed building as residential accommodation for students or school pupils; or
by a charity for non-business purposes zero-rated.    
  construction of an annexe to an existing building by a charity for non-business purposes zero-rated
  conversion of a dwelling or a non-residential building as residential accommodation for students or school pupils reduced-rated

Purchasing and leasing buildings

The sale or lease of a building may be standard-rated, zero-rated or exempt from VAT depending on the circumstances.

Broadly, if the building is intended for use solely:

  • as residential accommodation for students or school pupils; or
  • by a charity for non-business purposes,

the first sale or long lease by the person constructing it is zero-rated. Subsequent sales and long leases, and any leases other than long leases, will be exempt. We accept that the term ‘solely’ is mitigated by a de minimis provision which means that a building, or part of a building, is taken as intended for use solely for a relevant residential purpose if at least 95% of it is used for that purpose.

If the building is not intended for the above qualifying purposes then:

  • the sale of a building less than 3 years old is standard-rated; and
  • the sale of a building over three years old or the lease of a building is exempt from VAT.

However, the supplier may opt to tax an exempt supply and charge VAT unless the building is intended for use solely for one of the above qualifying purposes

Further information on zero-rating and reduced-rating

Further information on zero-rated and reduced-rated supplies, including the detailed conditions that need to be met, can be found in VCONST and VAT Notice 708 Buildings and construction.

The notice also explains:

  • the need to issue a certificate to the person constructing the building, confirming that the building will be used solely for a qualifying use;
  • the concessions that allow recipients of building services to ignore minor non-qualifying use;
  • liability to a penalty for issuing an incorrect certificate; and
  • VAT liabilities if the use of the building is changed.

Further information on exemption and option to tax

Further information on exemption and option to tax, including the detailed conditions that need to be met, can be found in

VATLP VAT Land and Property

Notice 742 Land and property and

Charitable status

Charitable status

With the exception of community schools and community special schools all of the institutions listed in paragraph VATEDU28000 have charitable status, together with universities and many independent schools. Other individual education providers may also be charities. Guidance V1-09 Charities and Notice 701/1 Charities contain further details.

Examples of buildings used for business purposes

The following are examples of buildings used for business purposes:

  • any building, for example an assembly hall, at a fee-paying independent school;
  • any building at a further education college used for teaching fee-paying and non-fee paying students;
  • a sports hall at a foundation school that is regularly made available to the wider community for a charge, even if not for profit.