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HMRC have published a brief relating to the VAT treatment of conversions of non-residential buildings into dwellings that are the subject of of PDRs (permitted development rights). PDRs are relevant to specific developments and represent a reduction in information requirements on planning applications. PDRs are only applicable to the conversion of specific buildings, including shops, offices and agricultural buildings. Under current legislation, the granting of statutory planning consent (SPC) is required for builders or developers to zero-rate the onward sale of dwellings converted from non-residential buildings – this is also true for those seeking to make a claim under the DIY House Builders Scheme and for some reduced-rated supplies of construction services. However, HMRC have sought to simplify this regulation and under this newly proposed policy, SPC would not have to be granted with the relevant work being undertaken in accordance with this consent. Instead, developments of this nature can be evidenced and carried out under a PDR whilst still allowing for zero or reduced-rating or a DIY House Builders claim to be eligible. Evidence will still be required where the change of use of a building is covered by a PDR; this evidence should take to form of written notification from a local planning authority that approval has either been granted or is not required. This brief will affect any builder or developer converting a non-residential property into a dwelling as well as those looking to claim back VAT through the DIY House Builders Scheme and therefore, if you fall into this category, please call our free VAT helpline to ascertain how this brief is applicable to you, the VAT liability of supplies you are making and the conditions it will be necessary to meet to qualify for the correct liability.

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