VAT – Qualifying buildings
HMRC have issued a clarification relating to a simplification to the VAT ‘change in use’ provisions for buildings intended to be used for a relevant residential or relevant charitable qualifying purpose that came into effect on 1 March 2011.
HMRC want to make it clear that the simplified provisions only apply to buildings completed on or after 1 March 2011 where there is a ‘change in use’ from a qualifying one to a non-qualifying one on or after 1 March 2011.
The change means that 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 place of the two adjustment mechanisms there will be a single adjustment mechanism to be applied in all circumstances. If the buildings were completed before 1 March 2011, the old ‘change in use’ provisions will apply.
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.