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HM Revenue and Customs Brief 47/11


HM Revenue and Customs -Tax Authorities

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Issued: 30 December 2011

VAT - zero rate - 'extra care accommodation'


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).


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.

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Article Published/Sorted/Amended on Scopulus 2012-01-03 07:54:47 in Tax Articles

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