HM Revenue and Customs Brief 9/16 - VAT treatment of conversions of non-residential buildings
Submit Articles Back to Articles
Published 3 May 2016
This brief clarifies HM Revenue and Customs’ (HMRC) position
on the VAT treatment of conversions of certain non-residential
buildings into dwellings following the introduction of additional
permitted development rights (PDRs).
Who should read this?
Builders and developers who convert non-residential buildings
into dwellings for which individual statutory planning consent is not
required because the development is covered by PDRs. This
also applies to any person carrying out a similar conversion who will
be making a claim for a refund of VAT under the DIY House Builder
apply differently across the UK as planning is a devolved matter. If or
when further PDRs
are introduced that extend their scope to cover other types of
conversions of non-residential buildings into dwellings, the terms of
this brief will equally apply to them wherever they are in the UK.
What are PDRs?
are a national grant of planning permission for particular types of
development as set out in the legislation. They serve to streamline the
planning process by removing the need for a full planning application,
therefore reducing the information requirements.
As part of its aim to simplify the planning system, the
government has introduced additional PDRs which
permit the conversion (change of use) of specific categories of
buildings into dwellings. These buildings include those that have been
used, prior to change of use, as shops, for provision of financial and
professional services, betting offices, pay day loan shops, amusement
arcades or centres, casinos, offices, storage or distribution centres
and agricultural buildings.
may be subject to specific limitations (eg size) or with specific
exclusions (eg works on listed buildings) as set out in legislation.
may require the prior approval of the local planning authority (LPA) although
this is normally reserved for certain planning matters such as
flooding, highways and contamination, etc as specified in the
individual rights as set out in legislation.
Where prior approval is required under a national PDR, the LPA has a
period of 56 days following the date on which the application was
received to grant or refuse permission or advise that prior approval is
not required. If notification is not given within this time, the
applicant has deemed consent and the development may proceed in
accordance with the details specified in the application.
Wales currently applies PDRs in
only one situation. That is the conversion into flats of the upper
floors of buildings where the ground floors are being used as shops or
for the provision of financial/professional services. As long as the
conversion is of this type of building into a dwelling, the conversion
may proceed without the need to establish whether prior approval is
At present, there are no PDRs in
these regions in respect of the creation of dwellings from former
Current VAT treatment
To zero-rate the sale of all newly converted dwellings (from
non-residential buildings) or to make a valid claim under the DIY House
Builder Scheme, the newly converted building must meet the requirements
of a building ‘designed as a dwelling’. Further information can be
found in Section 14 of Notice 708: buildings and construction (14
One of the conditions is that the developer, builder or DIY
House Builder Scheme claimant must be able to demonstrate that
statutory planning consent (SPC)
has been granted in respect of that dwelling and that its construction
has been carried out in accordance with that consent.
In addition, part of the conditions for some supplies of
construction services to be eligible for the reduced rate of VAT of 5%
for the conversion of a non-residential building into a dwelling
requires individual SPC.
Further information can be found in Section 7 of Notice
708: buildings and construction (14 August 2014).
Following the introduction of PDRs,
individual SPCs will no longer be required for some developments making
the meeting of this condition difficult.
is clarifying its policy concerning the VAT treatment of works where an
individual planning application is not necessary because statutory
planning consent has been granted though PDRs.
will continue to require evidence to be produced that the work is
lawful in order for the zero or reduced rate of VAT to apply or for a
claim to be eligible under the DIY House Builder Scheme. Where the
builder, developer or DIY House Builder Scheme claimant establishes
that the conversion is covered by a PDR and individual SPC is not
required, they must be able to evidence it by at least 1 of the
a) Written notification from the LPA advising
of the grant of prior approval. or
b) Written notification from the LPA advising
that prior approval is not required. or
c) Evidence of deemed consent (ie evidence that you have written to the
and your confirmation that you have not received a response from them
within 56 days) and evidence that the development is a permitted
development. This will include all of the following (where the
documents have been created), plans of the development, evidence of the
prior use of the property (eg evidenced by its classification for
business rates purposes etc.), confirmation of which part of the
planning legislation is relied upon for the development and a lawful
development certificate where one is already held.
Developments carried out under a PDR must still meet the
appropriate building standards. Should any circumstances arise where
building control is not required, evidence from the local authority
confirming this should be provided.
About the Author
© Crown Copyright 2016.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2016-05-04 00:00:00 in Tax Articles