VAT – Change in use of qualifying buildings
HMRC have announced a simplification to the VAT ‘change in use’ provisions for buildings intended to be used for a relevant residential or relevant charitable qualifying purpose.
The ‘change in use’ provisions come into play when a building ceases to be used solely for a ‘qualifying purpose’ within a ten year period following the buildings completion.
With effect from 1 March 2011, there will no longer be two adjustment mechanisms (each with its own rules on how to calculate and apply a tax charge) to apply to the two sets of circumstances where a ‘change in use’ occurs.
In future there will be a single adjustment mechanism to be applied in all circumstances. HMRC have also published a new VAT information sheet 04/11 entitled ‘Change in use provisions’ which provides further information on the simplification.
The ‘change in use’ provisions allow HMRC to ‘claw back’ some or all of the original relief where the building is no longer used solely for a qualifying purpose e.g. part of the building is rented to a tenant and used for business purposes.