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CLAUSE 95: VAT : RESIDENTIAL CONVERSIONS AND RENOVATIONS
SUMMARY
1.
This clause introduces a reduced rate of VAT for the conversion of
a property into a different number of dwellings; conversions of dwellings
into residential communal homes; and the renovation of dwellings that
have been empty for at least 3 years with effect from the day after
Royal Assent.
DETAILS OF THE CLAUSE
2.
Subsection (1) amends paragraph 1 of Schedule A1 to the Value
Added Tax Act 1994 (supplies chargeable at the reduced rate). The
amendments are described in paragraphs 3 to 5 below.
3.
New subparagraph 1(6) provides that qualifying conversion services,
and building materials supplied with those services, are included
within the Reduced Rate Schedule.
4.
New subparagraph 1(7) provides that qualifying renovation or
alteration services, and building materials supplied with those services,
are included within the Reduced Rate Schedule.
5.
New subparagraphs 1(8) and (9) provide that where a single
supply consists in part of qualifying works and in part other works,
an apportionment may be made so that the reduced rate only applies
to the qualifying works.
6.
Subsection (2) extends the existing rules on interpreting paragraph
1 of Schedule A1 to the Value Added Tax Act 1994 (supplies chargeable
at the reduced rate). The amendments are described in paragraphs 7
to 39 below.
7.
New paragraph 8(1) introduces interpretative provisions for
qualifying conversions.
8.
New paragraph 8(2) defines “single household dwelling”.
9.
New paragraph 8(3) defines “multiple occupancy dwelling”.
10.
New paragraph 8(4) limits the definition of ‘single household
dwelling’ and ‘multiple household dwelling’ to separate self-contained
living accommodation.
11.
New paragraph 8(5) provides that whether a building “is designed”
as a dwelling depends on how the building was originally constructed
or how it has become adapted.
12.
New paragraph 9 defines “qualifying conversion” as one of three
types of qualifying conversion activity.
13.
New paragraph 10(1) defines a “changed number of dwellings
conversion” as meaning either the conversion of a building or part
of a building where the conditions in 10(2) and 10(3) are met.
14.
New paragraph 10(2) limits a ‘changed number of dwellings conversion’
to conversions where the number of ‘single household dwellings’ change,
provided that after the work at least one ‘single household dwelling’
remains.
15.
New paragraph 10(3) excludes work to a part of a building where
the work does not change the number of ‘single household dwellings’
in that part.
16.
New paragraph 11(1) defines “house in multiple occupation conversion”
as meaning either the conversion of a building or part of a building
where the condition in paragraph 11(2) is met.
17.
New paragraph 11(2) limits a ‘house in multiple occupation
conversion’ to conversions from ‘single household dwellings’ to ‘multiple
occupancy dwellings’, provided that after the conversion the premises
are not intended to be used for a ‘qualifying residential purpose’.
18.
New paragraph 12(1) defines “special residential conversion”
as meaning the conversion of a building, a number of buildings, or
parts of buildings where the conditions in 12(2) to (7) are met.
19.
New paragraph 12(2) and (3) limits a ‘special residential conversion’
to conversions of ‘single household dwellings’ and ‘multiple occupancy
dwellings’ along with their outbuildings or any combination thereof.
20.
New paragraph 12(4) excludes from a ‘special residential conversion’
the conversion of premises that prior to conversion are being used
for a ‘qualifying residential purpose’.
21.
New paragraph 12(5) limits a ‘special residential conversion’
to the conversion of premises that after conversion will be used solely
for a ‘qualifying residential purpose’.
22.
New paragraph 12(6) and (7) limits a ‘special residential conversion’
to conversions which create an institution (and not part of an institution)
which is used for a ‘qualifying residential purpose’.
23.
New paragraph 13 provides that a ‘special residential conversion’
is not a qualifying conversion unless the services are made to the
user of the building and they certify that the conditions in paragraph
12 are met.
24.
New paragraph 14 provides that work to construct a garage or
the conversion of a building into a garage are qualifying works when
carried out at the same time as a qualifying conversion provided that
the garage is intended to be occupied with the resultant dwelling
or premises.
25.
New paragraph 15 excludes from a ‘qualifying conversion’ works
which, if necessary, have not been granted planning consent or building
control approval.
26.
New paragraph 16(1) to (2) defines “qualifying conversion services”
as meaning work to the fabric of the building or part of the building
or certain works within the immediate site of the building.
27.
New paragraph 16(3) includes within ‘qualifying conversion
services’ the incorporation or installation of ‘building materials’.
28.
New paragraph (17) defines “qualifying residential purpose”.
29.
New paragraph 18(1) introduces interpretative provisions for
‘qualifying renovations or alterations’.
30.
New paragraph 18(2) provides interpretative provisions for
“alteration” and “single household dwelling”.
31.
New paragraph 19(1) introduces provisions for the scope of
‘qualifying renovations and alterations’.
32.
New paragraph 19(2) provides that the reduced rate for renovating
an empty dwelling will only apply where the property has been empty
for at least 3 years before the works commence.
33.
New paragraph 19(3) provides that where a person occupies
a dwelling that has been empty the reduced rate will apply where the
dwelling was empty for three years or longer (19(3)(a)); the person
purchased the property before they moved in (19(3)(b)); no renovation
work had been done in the three years before purchase (19(3)(c));
the supply is made to the person who purchased the empty property
(19(3)(d)); and ‘relevant works’ are carried out within one year of
the date of purchase (19(3)(e)).
34.
New paragraph 19(4) provides that “relevant works” are works
of renovation or alteration, or the incorporation or installation
of building materials.
35.
New paragraph 19(5) provides that paragraph 19 applies where
the occupier has purchased the freehold or a long lease in the property.
36.
New paragraph 20 excludes from a ‘qualifying renovation or
alteration’ works which, if necessary, have not been granted planning
consent or building control approval.
37.
New paragraph 21(1) defines “qualifying renovation or
alteration services” as meaning work to the fabric of the building
or part of the building or certain works within the immediate site
of the building.
38.
New paragraph 21(2) includes within ‘qualifying renovation
or alteration services’ the incorporation or installation of ‘building
materials’.
39.
New paragraph 22 defines “building materials”.
40.
Subsection (3) means that the amendments come into effect from
Royal Assent to the Finance Bill.
BACKGROUND
41.
Article 12(3) to the EC Sixth VAT Directive (Dir 77/388) permits member
states to apply a reduced rate of VAT of not less than 5% to supplies
of goods and services specified in Annex H to the Directive. Included
in Annex H, at Category 9, is the, “supply, construction, renovation
and alteration of housing provided as part of a social policy.”
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