HM Revenue and Customs Brief 13/16 - Dwelling formed
Submit Articles Back to Articles
Published 21 September 2016
Purpose of this brief
This brief explains the change in policy relating to the
treatment of dwellings that have been formed from either the
construction of new buildings, or from the conversion of
non-residential buildings into a dwelling. HM Revenue and Customs (HMRC) now
accepts that single dwellings can be formed from more than one building.
Who needs to read this?
All parties involved in the construction and supply of
buildings that are designed as dwellings or undertaking conversion
services of non-residential buildings.
had considered that while a building could contain more than one
dwelling, a dwelling could not be formed from more than one building.
This was because the law, Group 5 of Schedule 8 of the VAT Act 1994,
consistently referred to ‘a building designed as a dwelling’, which HMRC considered
precluded more than one building from constituting a dwelling.
However, it was decided in the First Tier Tribunal cases of
Mark Catchpole (TC01995) and Mr T Fox (TC01957) that for the purpose of
Group 5, it was appropriate to interpret the law as allowing the
construction of dwellings formed from more than one building, to be
eligible for zero-rating. HMRC,
having accepted this decision, considers that it can, in principle
apply to some conversions.
The change in policy
now accepts that the law doesn’t require a dwelling to be formed from a
A number of buildings may be combined to form a single
dwelling as long as they are designed to function together for that
In order to be eligible for the zero-rate, the buildings must
meet all the following:
the development must meet the conditions of a ‘building
designed as a dwelling’ and to this end ‘building’ can mean
more than one building
all buildings must be constructed or converted under a
single project and under a single consent, if a new dwelling that is
made up of more than one building is constructed in stages, we will
view subsequent stages as annexes to the original building, which will
not benefit from the zero-rate unless the buildings are on the same
- the stages are completed with no unreasonable delay
- none of the buildings are occupied until all the stages
are complete (to understand what is meant by ‘complete’ please read
Section 3.3.2 of VAT
Notice 708: buildings and construction
What is a building ‘designed as a
In order to be eligible for zero-rating the usual conditions
(please read VAT
Notice 708: buildings and construction) will need to be
satisfied but where more than one building is designed jointly to be a
single dwelling, their construction will be eligible for zero-rated
relief where the following conditions are satisfied:
- the dwelling consists of self-contained accommodation, it
will not be necessary for each of the buildings to be a dwelling in its
own right, for example, the bedrooms could be in one building and daily
living accommodation in another
- there is no provision for direct internal access from the
buildings forming the dwelling to any other dwelling or part of another
- the separate use, or disposal of the dwelling (comprising
more than one building), 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, resulting in a
dwelling formed by more than one building, has been carried out in
accordance with that consent
Where a building, designed as a dwelling, has been constructed
at the same time as another building and jointly the two are not to
form a single dwelling but rather to form a dwelling and an unattached
annexe (which is identified as such on the planning documents)
zero-rated relief will be restricted to the building that is a dwelling.
Where work is undertaken to convert premises consisting of
more than a single building into a dwelling (for example, where
premises are being converted to a different residential use), HMRC now accepts
that it would qualify for the reduced rate (5%) of VAT.
Date of effect
Those who have constructed or converted eligible buildings
into new dwellings, consisting of more than one building that hasn’t
previously been treated as zero-rated (for example, works of
construction and eligible conversion services) may submit claims for
overpaid VAT subject to the normal time limits.
The Commissioners may refuse claims where the claimant would
be ‘unjustly enriched’ as a consequence.
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 2016-09-22 00:00:00 in Tax Articles