HMRC have now published the above briefs which deal with forthcoming changes effective 1 March 2011.

Brief 3/11 explains minor changes to the option to tax for land and buildings (anti-avoidance rule), and in particular the treatment of occupation by grantors. Currently the option to tax is disapplied where the grantor, or a person connected to the grantor, is in exempt occupation of the land (and the other conditions in the anti-avoidance rule are met).

The changes to be introduced from 1 March 2011 mean that an option to tax will no longer be disapplied where the grantor or persons connected with the grantor only occupy minor parts of buildings even if the other conditions of the anti-avoidance rule are met.

Brief 5/11 announces a simplification of the ‘change in use’ provisions (Paragraphs 35 to 37 of Part 2 of Schedule 10 to the Value Added Tax Act 1994) by Value Added Tax (Buildings and Land) Order 2011 (SI 86/2011).

With effect from 1 March 2011, 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.

Instead, there will be a single adjustment mechanism to be applied in all circumstances. It will be based on the:

• amount of VAT that would have been chargeable on the original supply (or supplies) had the building in question not been eligible for the zero rate;
• proportion of the building that is affected by the change in use; and
• number of complete months that the building has been used solely for a qualifying purpose prior to the change in use.

The newly issued briefs can be accessed at http://www.hmrc.gov.uk/briefs/vat/brief0311.htm and http://www.hmrc.gov.uk/briefs/vat/brief0511.htm