New Build Property VAT

Chapter 8 group 5 which cover xero rated supplies when constructing CERTAIN types of property. VAT on land and building has many transactions , however each transaction is independent for the purpose of VAT, simply some transactions will be zero rated and other services will be standard rated.

Onward supply of a new build. Selling Sch 8 group 5 item 1a says that if the followings are met, then the sale of the property is zero rated VAT. The conditions are

1. Grant of interest or longer than 21 years of lease is given
2. The property is Dwelling, Relevant residential, or relevant chartable.

Dwelling means self-contained home, House or flat

Relevant residential means homes for children or older people, nurse and etc

Relevant chartable, non-business purpose.

If the above conditions are met then no output vat on the sale.  Under the Dwelling the developer knows what the building is for and there is a planning consent. But when it comes to relevant homes, they will need to provide the sales certificate of use. I.e., what the building will be used for.

Converting a commercial building to dwelling

For this to be zero rated it has to be a commercial building such as office or warehouse and it will be converted to dwellings and first grant interest will be then no VAT.

INPUT VAT COST ON CONSTRUCTION

chapter 8 group 5 items 2 & 4 cover the Input VAT on cost of construction, which some are zero rated, some are not, and some are blocked cannot claim input VAT.

All services and materials in conjunction of dwelling build are zero rated, but services of Architect, surveyor, Material on their own are standard rated VAT.

Any white goods are blocked, and input VAT cannot be claimed on them.

The developer will be able to recover the input VAT because they are making taxable supply and not exempt supply. But if the homes were put on rent then this will amount to exempt supply and hence no input VAT can be claimed.

Relevant home appoints a developer to build a new relevant home, then in this case all the services provided to the developer are standard rated and the sale to the relevant home is zero dated as long as certificate of use is obtained by the developer.

The reason the services provided by others are Vatable because the work is for the relevant home not for the developer therefore the relevant home can not issue certificate of usage to every one except the developer which the building is not his, the developer will be able to re claim all the input VAT.

As mentioned above most of the input VAT the developer will be able to claim back except for white goods which are blocked, as these are not part of the construction and usually normal consumer will buy these goods and no input VAT can be claimed. Therefore, the same should be treated with the developer.

For further information check HMRC SCH 8 Group 5

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