HM Revenue and Customs Brief 47/11
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Issued: 30 December 2011
VAT - zero rate - 'extra care accommodation'
Summary
The purpose of this Brief is to clarify the VAT liability of
the construction and first sale of dwellings that are linked to a
separate provision of care (extra care accommodation).
Readership
Those involved in the construction or development of
dwellings that are linked to a separate provision of care.
Action required
For information only.
Meaning of 'extra care accommodation'
For the purpose of this Brief extra care accommodation refers
to self contained flats, houses, bungalows or maisonettes that are sold
or let with the option for the occupant to purchase varying degrees of
care to suit his or her needs as and when they arise. It does not apply
to accommodation where the occupant needs care or supervision of a type
typically provided by an institution (see 'other types of
accommodation' below).
Criteria for zero rating: Buildings designed as dwellings
Some planning authorities in England have classified extra
care accommodation under Use Class C2 of the Town and Country Planning
(Use Classes) Order 1987, rather than Use Class C3, which is the class
that ordinarily applies to flats, houses, bungalows and maisonettes.
While developments reviewed to date have all been in England, it is
likely that similar issues may have arisen in developments in other
parts of the UK where equivalent but not identical Use Classes apply.
However, HM Revenue & Customs (HMRC) is satisfied
that the classification for planning purposes is not of itself
determinative as to the nature of the building and so does not
establish whether the building is 'designed as dwellings' for the
purpose of the VAT zero rate.
HMRC accepts, regardless of the Use Class, that extra care
accommodation is 'designed as a dwelling', and therefore its
construction and first sale or long lease will be zero rated, if
it meets all of the standard conditions, which are as follows:
- the dwelling consists of self-contained living
accommodation
- there is no provision for direct internal access from the
dwelling to any other dwelling or part of a dwelling
- the separate use of the dwelling is not prohibited by the
terms of any covenant, statutory planning consent or similar provision
- the separate disposal of the dwelling is not prohibited by
the terms of any covenant, statutory planning consent or similar
provision
- statutory planning consent has been granted in respect of
that dwelling and its construction or conversion has been carried out
in accordance with that consent
Other types of accommodation
This Brief is limited to extra care accommodation. HMRC
intends to consider other types of accommodation and whether or not
they too can be considered to be 'designed as a dwelling' early in 2012.
Further information about these conditions and the VAT
treatment of residential construction and development can be found in
Notice 708 Buildings and construction and HMRC's technical manual
V1-08A: Construction.
About the Author
© Crown Copyright 2011.
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.
