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HMRC internal manual

VAT Land and Property

Option to tax anti-avoidance - funding and financing: other payments or transfers from tenant to owner - funding or not?: introduction

Having established that a person meets the intention test and that the building or part of the building in question is or will become a capital item for its owner, the next issue to consider is whether the payment, arrangement, transfer etc made does actually constitute funding. Funding is deliberately given a broad meaning in the law to cover all situations where a person, either directly or indirectly, makes a financial contribution to a development. The question to ask is whether the owner or developer is paying less for the development than they otherwise would have done? In other words, have they received a financial benefit?

There are many situations where money or assets may pass, either directly or indirectly, from tenant to owner before, during or after the course of a development, but not all of these will be funding. Some of the most common situations are described below: