VAT – Qualifying buildings consultation
HMRC have announced a 4 week consultation re proposals to simplify the VAT ‘change in use’ provisions.
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. The 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.
The current rules are complex and can produce uneven tax consequences. The consultation invites interested parties to comment on the draft statutory instrument (by 3 January 2011) which seeks to simplify the ‘change in use’ provisions. The new legislation, when enacted, will result in one single adjustment mechanism to be applied in all circumstances.