The Value Added Tax (Buildings and Land) Order 2011

• Citation: S.I. 2011/86
• Sections: 8

Section 1 Citation, commencement and effect

This Order may be cited as the Value Added Tax (Buildings and Land) Order 2011 and shall come into force on 1st March 2011.

Section 2 Citation, commencement and effect

Articles 4 to 7 shall have effect in relation to supplies made on or after 1st March 2011 other than a supply arising from a grant made before 1st March 2011.

Section 3 Citation, commencement and effect

Article 8 of this Order shall have effect in relation to buildings that are completed on or after 1st March 2011.

Section 4 Amendment of Schedule 10 to the Value Added Tax Act 1994

Schedule 10 to the Value Added Tax Act 1994 (buildings and land) is amended as follows.

Section 5 Amendment of Schedule 10 to the Value Added Tax Act 1994

In paragraph 15 (meaning of “exempt land”: basic definition), for sub-paragraph (3A) substitute—

(3A) Where a person (“P”) is in occupation of the land at any time before the end of the relevant adjustment period as respects that land, P is treated for the purposes of sub-paragraph (2) as not in occupation of the land at that time if—

(a) the building occupation conditions are met at that time, or

(b) P’s occupation of the land arises solely by reference to any automatic teller machine of P.

Section 6 Amendment of Schedule 10 to the Value Added Tax Act 1994

In paragraph 15A (meaning of “exempt land”: the building occupation conditions)—

(a) in sub-paragraph (1)(b)(ii) for “10%” substitute “the maximum allowable percentage”;

(b) at the end of sub-paragraph (2) add—

if that occupation is not wholly, or substantially wholly, for eligible purposes.

(c) for sub-paragraph (4) substitute—

(4) In sub-paragraph (1)(b)(ii)—

“the maximum allowable percentage” means—

2% where P is the grantor or a person connected with the grantor, and

10% where P is a development financier or a person connected with a development financier (but not also the grantor or a person connected with the grantor), and

“relevant building”—

means a building any relevant interest in which is included in the grant, other than any part of such a building in which, immediately before the grant, neither the grantor nor any person connected with the grantor held a relevant interest, but

does not include any building P’s occupation of which arises solely by reference to any automatic teller machine of P.

(d) after sub-paragraph (6) insert—

(6A) Sub-paragraph (5) of paragraph 15 (determination of whether occupation “wholly, or substantially wholly” for eligible purposes to be by reference to criteria in public notice) applies for the purposes of this paragraph.

Section 7 Amendment of Schedule 10 to the Value Added Tax Act 1994

In paragraph 16 (meaning of “exempt land”: eligible purposes) omit sub-paragraph (7).

Section 8 Amendment of Schedule 10 to the Value Added Tax Act 1994

For paragraphs 35 to 37 (residential and charitable buildings: change of use etc ) and their headings substitute—

Introductory

(35)

(1) This Part of this Schedule applies where one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to a person (“P”).

(2) In this Part of this Schedule—

“relevant zero-rated supply” means a grant or other supply which relates to a building (or part of a building) intended for use solely for—

a relevant residential purpose, or

a relevant charitable purpose,

and which, as a result of Group 5 of Schedule 8 , is zero-rated (in whole or in part);

“relevant premises” means the building (or part of a building) in relation to which a relevant zero-rated supply has been made to P;

“relevant period”, in relation to relevant premises, means 10 years beginning with the day on which the relevant premises are completed.

(3) Where P is a body corporate treated as a member of a group under sections 43A to 43D , any reference in this Part of this Schedule to P includes a reference to any member of that group.

Disposal of interest or change of use following relevant zero-rated supply

(36)

(1) Paragraph 37 applies on each occasion during the relevant period when—

(a) there is an increase in the proportion of the relevant premises falling within sub-paragraph (2) or (3), and

(b) as a result, the proportion of the relevant premises so falling (“R2”) exceeds the maximum proportion of those premises so falling at any earlier time in the relevant period (“R1”).

(2) The relevant premises fall (or part of the relevant premises falls) within this sub-paragraph if P has, since the beginning of the relevant period, disposed of P’s entire interest in the relevant premises (or part).

(3) The relevant premises fall (or a part of the relevant premises falls) within this sub-paragraph if—

(a) those premises do not (or that part does not) fall within sub-paragraph (2), and

(b) those premises are (or that part is) being used for a purpose that is neither a relevant residential purpose nor a relevant charitable purpose.

(4) Sub-paragraph (5) applies where—

(a) only a proportion of the use of the relevant premises (or the use of a part of those premises) is for a relevant residential purpose or a relevant charitable purpose, and

(b) that use is not confined to a part of those premises (or of that part) which is used solely for a relevant residential purpose or a relevant charitable purpose.

(5) Where this sub-paragraph applies, sub-paragraph (3) applies as if—

(a) the same proportion of the relevant premises (or part) were being used for a relevant residential purpose or a relevant charitable purpose, and

(b) the remainder of the relevant premises (or part) were being used for a purpose that is neither a relevant residential purpose nor a relevant charitable purpose.

(6) Where P is a charity using the relevant premises (or a part of the relevant premises) as a village hall or similarly in providing social or recreational facilities for a local community the premises are (or the part is) treated as being used for a relevant charitable purpose whether or not any person in occupation is using the premises (or part) for a relevant charitable purpose.

Charge to VAT

(37)

(1) Where this paragraph applies, P’s interest, right or licence in the relevant premises held immediately prior to the time when the increase referred to in paragraph 36(1) occurs is treated for the purposes of this Part of this Schedule as—

(a) supplied to P for the purposes of a business which P carries on, and

(b) supplied by P in the course or furtherance of that business

immediately prior to the time of that increase.

(2) The supply is taken to be a taxable supply which is not zero-rated as a result of Group 5 of Schedule 8.

(3) The value of the supply is taken to be—

(a) in the case of the first deemed supply under this paragraph, the amount obtained by the formula—

R 2 × Y × ( 120 − Z 120 ) , and

(b) in the case of any subsequent deemed supply under this paragraph, the amount obtained by the formula—

( R 2 − R 1 ) × Y × ( 120 − Z 120 )

(4) For the purpose of sub-paragraph (3)—

(a) R1 and R2 have the meaning given by paragraph 36(1)(b),

(b) Y is the amount that yields an amount of VAT chargeable on it equal to—

(i) the VAT which would have been chargeable on the relevant zero-rated supply, or

(ii) if there was more than one supply, the aggregate amount of the VAT which would have been chargeable on the supplies,

had the relevant premises not been intended for use solely for a relevant residential purpose or a relevant charitable purpose, and

(c) Z is the number of whole months since the day on which the relevant premises were completed.