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HMRC internal manual

VAT Land and Property

Option to tax: scope of the option to tax: what constitutes a building?

For option to tax purposes, paragraph 18 of Schedule 10 treats the following as a single building:

  • buildings that are, or if not yet built are planned to be linked internally or linked by a covered walkway (ie where a link is created after the completion of the buildings they are not treated as a single building) and
  • complexes consisting of a number of units grouped around a fully enclosed concourse, such as a shopping mall.

What does ‘linked internally’ mean?

The term ‘linked internally’ is not defined in the law. In HMRC’s view, buildings are linked internally where a link provides access for the free movement of goods and people between buildings, so that people do not have to leave one building in order to enter the other. Examples of such links are internal doors between buildings and shared common areas for staff, such as a reception areas or canteens, which give access to both buildings.

What is a ‘covered walkway’?

A ‘covered walkway’ is a passage which primarily provides for the movement of people between buildings without exposure to the outside elements. For example a factory with three separate production lines that are all linked by covered corridors. For option to tax purposes, the term ‘covered walkway’ does not include covered walkways to which the public has reasonable access (paragraph 18(7), Schedule 10).

What is a ‘fully enclosed concourse’?

Under Schedule 10 paragraph 18(4)(b) a complex consisting of a number of units grouped around a fully enclosed concourse is treated as a single building. The intention is to treat a large modern shopping mall as a single building. To be treated as a fully enclosed concourse the following characteristics must be present. The complex must be:

  • enclosed by walls
  • covered by a roof, and
  • entered through doors.