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HMRC internal manual

VAT Land and Property

From
HM Revenue & Customs
Updated
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Option to tax anti-avoidance - funding and financing: under what circumstances is someone considered to have financed the owner’s development?

Under paragraph 14(1) to (2) a person is considered to have financed the owner’s development (purchase, construction or refurbishment) of the capital item (building) if, at the time he provided the finance or entered into an agreement to provide the finance he had the intention or expectation that the building is to be occupied by either:

  • himself
  • the person making the grant, or
  • a person connected to either of them otherwise than wholly or mainly for taxable business purposes.

Paragraph 3A(4) defines that a person is considered to have financed the owner’s development of the capital item if he directly or indirectly:

  • provides all or part of the necessary funds
  • procures those funds from another person
  • provides the funds for discharging wholly, or in part, the owner’s borrowing for the development, or
  • procures that such a liability will be discharged by another.

It is important to note a person can be a financier of the development even if he has only part funded the works.