This Brief clarifies the VAT liability of the construction and first sale of dwellings that are linked to a separate provision of care (extra care accommodation). It is targeted at those involved in the construction or development of such dwellings.

For the purpose of the Brief extra care accommodation refers to self-contained flats, houses, bungalows or maisonettes that are sold or let with the option for the occupant to purchase varying degrees of care to suit his or her needs as and when they arise. It does not apply to accommodation where the occupant needs care or supervision of a type typically provided by an institution.

HMRC state they are satisfied that the classification of a dwelling for planning purposes is not of itself determinative as to the nature of the building and so does not establish whether the building is ‘designed as dwellings’ for the purpose of the VAT zero rate.

Furthermore, HMRC accepts, regardless of the Planning Use Class, that extra care accommodation is ‘designed as a dwelling’, and therefore its construction and first sale or long lease will be zero rated, if it meets all of the standard conditions.

The various conditions are as follows:

• the dwelling consists of self-contained living accommodation
• there is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling
• the separate use of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision
• the separate disposal of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision
• statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent

The Brief is available in full at:-http://www.hmrc.gov.uk/briefs/vat/brief4711.htm