HMRC, in its latest Revenue and Customs Brief (13 of 2021) has amended its policy on the VAT treatment of the construction self-supply charge and what it considers disposal of an ‘entire interest’.

If the buildings are used for a relevant residential, charitable purpose or care home then zero-rating of VAT is available. It is available on four classes of supplies made in connection with the construction or conversion of buildings

Due to changes in legislation and cases, HMRC has now revised its policy. They also said that if the below four conditions are not met then the disposal of an entire interest will not occur

  • a qualifying property must have been purchased
  • with no time-lapse, there must be an immediate lease in place when the property is sold which is a seamless transaction
  • the lease should be for the remaining term of the ten years from the original purchase date, or longer; and
  • the property must be continually used or operated for a qualifying purpose, meaning the business suffers no break in trade during the sale and leaseback.