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.