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 Articles
-
The hidden income tax benefit of marriage
You recently got married and a relative joked that you can save lots of money because of the tax breaks for married couples. As a newlywed are you entitled to a reduction in your income tax bill?
-
The tax incentive to do a thorough stock-take
The annual stock-take isn’t exactly your favourite thing to do. You know resources could be better spent elsewhere so you try to get through it as quickly as possible. Why might it be worth a little more of your time?
-
Accounting for VAT if there is no cash payment
Your business has submitted repayment returns for the last two quarters and you are concerned that you might have underpaid output tax on some supplies where no money has changed hands. Are your concerns justified?