VAT and conversion services
HMRC’s Policy Change on VAT for Dwellings Formed from Multiple Buildings
In a significant policy shift, HM Revenue and Customs (HMRC) now accepts that a single dwelling can be formed from more than one building. Previously, HMRC maintained that while a building could contain multiple dwellings, a dwelling could not span multiple buildings. This change, effective retrospectively from 23 August 2012, has important implications for property developers and contractors.
Implications of the Policy Change
With this updated stance, the construction or conversion of dwellings comprising multiple buildings may now qualify for VAT reliefs:
- Zero-Rating for New Constructions: The construction of new dwellings formed from more than one building can be eligible for zero-rating, provided they meet the criteria of a ‘building designed as a dwelling.’
- Reduced 5% VAT Rate for Conversions: Conversions of premises consisting of more than one building into a single dwelling may qualify for the reduced 5% VAT rate, especially when converting to a different residential use.
To benefit from these VAT treatments, the buildings must be:
- Designed to function together as a single dwelling.
- Constructed or converted under a single project and consent.
This policy change acknowledges the architectural and functional realities of modern housing developments, where a single residence may encompass multiple structures.
Considerations for Property Developers
Property developers should assess their projects to determine eligibility for these VAT reliefs. Key considerations include:
- Project Design: Ensure that the combined buildings are designed to operate cohesively as a single dwelling.
- Planning Consents: Obtain unified planning consent covering all buildings involved in the project.
- Documentation: Maintain thorough records demonstrating that the construction or conversion meets HMRC’s criteria for a single dwelling formed from multiple buildings.
By aligning project plans with HMRC’s updated policy, developers can achieve significant VAT savings.
How We Can Help with VAT on Dwellings Formed from Multiple Buildings
Navigating VAT regulations can be complex, especially with evolving policies. At Lewis Brownlee, we offer expert guidance to ensure your property development projects comply with HMRC’s latest rules. For personalised advice, please contact us.
Understanding HMRC’s revised policy on VAT for dwellings formed from multiple buildings is crucial for property developers aiming to optimise tax efficiencies in their projects.