Building certificates needed for 0% VAT
If you provide construction services on a new building to be used for a relevant charitable or residential purpose, or sell a new building to the users, your supply will be zero-rated. But what documents must you get?
Zero-rated
If your business does work constructing a new building for a charity, or on a new building that will be used for a relevant residential purpose (RRP), such as a home for elderly people or student accommodation, your services will be zero-rated. However, that is not the end of the story.
Certificate
As a condition of zero-rating, you must obtain a signed certificate from the building owner, confirming they will use the new building for a charitable purpose or RRP. A charitable purpose means use by a charity for either a non-business activity or use as a village hall or similar.
A new building used for a business activity by a charity, such as a charity shop or café, will not benefit from zero-rated building services, they will be standard-rated. All work caried out on existing buildings is standard-rated.
Change
The legislation gives HMRC the right to dictate the format of the zero-rated certificates. HMRC has now updated VAT Notice 708 (see The next step ) to confirm that the certificates published in this notice have the force of law. In other words, you should use the template and wording in the notice and not create your own version.
What does it mean?
If you do not tick all the boxes for zero-rating, HMRC officers have the power to treat your supplies as standard-rated and issue an assessment. This would be a major problem because charities and RRP building owners cannot fully claim input tax.
Related Topics
-
What’s the difference between an error and an adjustment?
Your business must disclose errors to HMRC above certain limits in writing. But it can include accounting “adjustments” on the next return. What are the main adjustments (that aren’t errors) that your business could make?
-
New interactive tool for transition period profit reporting published
If you are a sole trader, or a partner, reporting your profits could be more complicated this year due to the basis period reform. How can a new online tool help?
-
The IHT exemption that HMRC hides
You have the task of obtaining probate for your mother’s estate which involves completing tricky inheritance (IHT) tax forms. One of these requires you to report lifetime gifts. How might the form’s wording cause you to miss out on an IHT exemption?