Construction and zero rating

HMRC has revised its policy on when they will allow zero-rating for the construction of dwellings, where part of an original building is retained. The general rule for zero-rating is that an existing building must be demolished completely to ground level or no more than one single facade remains (or where a corner site is retained) and the retention is a condition or requirement of planning permission. HMRC now accepts that it also needs to take account of the nature of the work that is carried out. In exceptional cases, works on an existing structure may be so extensive as to amount to a new construction. 'Very minor' parts of a building retained above ground level may be treated as 'de minimis'. Where facades are retained, plans submitted to the planning authority must show evidence that their retention was a condition of planning consent.

If you or any of your clients are undertaking any construction or conversion works, we would recommend that you confirm the VAT liability of the works prior to commencing the works, as there may be VAT savings available.


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