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
-
HMRC checks directors’ loans are paid up
HMRC is writing to agents to check corporation tax returns for previous years are correct as it used to be possible to add a future date for an anticipated loan repayment. What’s the issue and what should you do if your advisor receives a letter?
-
Working from home tax relief scrapped in Budget
Employees who are required to work from home are currently able to claim tax relief at a flat rate of £6 per week. That's changing from 6 April 2026. What's the full story?
-
Government quietly confirms change to key tax deduction
The headlines for individuals at last week's Budget were all about the income tax hikes. But the small print contained confirmation of another important change. What’s the full story?
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.