When can a construction project or construction services qualify for zero-rated VAT?

The construction of a new building is normally subject to VAT. However, zero-rate VAT may be granted if the construction is a qualifying building.

In VAT Notice 708, HMRC outlines qualifying buildings as:

  • a building ‘designed as a dwelling’
  • a building that will be used solely for a ‘relevant residential purpose’
  • a building that will be used solely for a ‘relevant charitable purpose’ (for non-business use or as a village hall - see paragraph 14.7)

A new building can only qualify for zero-rated VAT if any existing structures are demolished, excluding foundations and basements.

For more information on qualifying buildings, read section 3.2.1 of VAT Notice 708.

Zero-rated services

Any services provided can be zero-rated as long as the following conditions set by HMRC are met:

  • A qualifying building has been, is being or will be constructed.
  • Your services are made ‘in the course of the construction’ of that building.
  • Where necessary, you hold a valid certificate.
  • Your services are not specifically excluded from zero-rating.

If you are unsure whether your construction project is zero-rated and would like expert advice, contact our VAT team today on 0800 077 4064 to see how we can help you.

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