HMRC amends its policy on the VAT construction self-supply charge

HMRC has revised the meaning of ‘entire interest’ for the purposes of the self-supply charge. This is as a result of the Supreme Court decision in Balhousie Holdings Ltd v CRC [2021] STC 753 which concerned the sale and leaseback of a care home.

When a property has been purchased or constructed at the zero rate of VAT with a certificate stating that it will be used for a relevant residential or relevant charitable purpose it may be liable to a self-supply charge if there is a change in use or the entire interest is disposed of within a ten-year period. The self-supply charge is calculated from the date when the change of use occurs or when the entire interest is disposed of. VAT then becomes due on the remaining months within the ten-year period.

HMRC has confirmed that there will be no disposal of the...