HM Revenue & Customs (HMRC) has recently set out its understanding of the VAT treatment of the construction of houses and flats in the grounds of residential care homes. In order for the construction to be zero-rated for VAT purposes, the dwellings must meet a number of conditions, including that they are intended for use solely for residential or charitable purposes.
HMRC policy states that where the houses or flats have a stipulation in their planning permission that they cannot be used separately from the care home, of which they form a part, the construction of such units is ineligible for zero rating.
It is essential that you seek appropriate professional advice on this matter if you are involved in the construction, sale or lease of houses or flats that are within the curtilage of the care home, to help you with the interpretation and practical application of the VAT rules.
If you need further information, please contact Vaughn Chown using the online form below.