Independent living

HMRC have recently published their policy on the VAT treatment of the construction and first major interest grant of 'independent living' units within the curtilage or grounds of residential care homes. (A 'first major interest grant' is defined as the freehold sale or a lease in excess of 21 years (20 years in Scotland).)

In order for services of the construction or first major interest grant of such units to qualify for zero rating they must qualify either as buildings 'designed as dwellings' or as buildings 'intended for use solely for a relevant residential purpose' within the meaning of these terms as defined in the VAT Act.

Although independent living units generally have all of the physical characteristics of a 'dwelling' the units only qualify for zero rating if they meet all the conditions laid down in VATA 1994 Sch 8...