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HMRC have introduced revised transitional rules following the axing of VAT concessions for the construction of student accommodation and dining halls and kitchens for students and school pupils.
The construction of a building intended for use solely for a relevant residential purpose is zero rated, as is the first grant of a major interest in such a building by the constructor. The user must provide a certificate to the builder or developer as evidence that the building is intended to be used solely – at least 95% - for a relevant residential purpose.
HMRC have introduced revised transitional rules following the axing of VAT concessions for the construction of student accommodation and dining halls and kitchens for students and school pupils.
The construction of a building intended for use solely for a relevant residential purpose is zero rated, as is the first grant of a major interest in such a building by the constructor. The user must provide a certificate to the builder or developer as evidence that the building is intended to be used solely – at least 95% - for a relevant residential purpose.
The Revenue announced in a technical note on 31 January 201the withdrawal from 1 April 2015 of a concession that allows higher education institutions to ignore vacation use when determining how new student accommodation are intended to be used.
The date will also see the end of a concession that allows dining rooms and kitchens to be zero rated as residential accommodation for students and school pupils if live-in students use them predominantly.
HMRC have now widened the transitional rules that determine which student accommodation buildings can rely on the concessions.
Certificates that rely on a concession to meet the “solely” for a relevant residential purpose test will still be valid where:
- the first supply for construction services is made before 1 April 2015 and relates to a meaningful start to the construction of the building by that date, and the works are expected to progress to completion without interruption; demolition or site clearance works will only be accepted where construction starts immediately afterwards.
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For the first grant of a major interest in new student accommodation:
- either a meaningful deposit – for example, on exchange of contracts – has been paid to the vendor before 1 April 2015; or
- an agreement for lease (or purchase) has been signed with the vendor or landlord before 1 April 2015 and a meaningful start to the construction of the building has taken place by that date, and the works are expected to progress to completion without interruption (demolition or site clearance works will only be accepted where construction starts immediately afterwards).
