VCONST04500 - Zero-rating major interest grants after a non-residential conversion: is the building the subject of a 鈥榥on-residential conversion鈥�: conversions of buildings that already contain a residential part
Major interest grants in converted buildings that contain a part that was previously residential are not normally zero-rated.
皇冠体育app exception is where the additional dwelling or dwellings created by the conversion is contained entirely within a part of the building that was previously non-residential. Zero-rating is limited to the grant in that part.
皇冠体育appre is no provision for such grants to be apportioned. 皇冠体育app decision in Calam Vale Ltd (VTD 16869) confirms this. 皇冠体育app Tribunal stated:
鈥f you take a four-storey office block with a wide frontage and a caretakers flat occupying the whole of the attics and convert that block vertically into four town houses (each incorporating a quarter of the attic) you will get no relief; if you convert it horizontally into four flats, leaving the attics untouched, you will get relief鈥� Equity would suggest that there should be apportionment; the Act, whether inadvertently or by design, makes no provision for this.
皇冠体育app relevant legal provisions are different for grants in dwellings compared to grants in buildings (or parts of a building) intended for use solely for a 鈥榬elevant residential鈥� purpose.
For grants in dwellings the relevant legal provision is in the Value Added Tax Act 1994, Schedule 8, Group 5, Note 9.
Note 9 works in the following way:
| Step | Issue | Action |
|---|---|---|
| 1 | Does the building, as a whole, contain residential and non-residential parts? | Yes, go to step 2. No, then the building is either wholly 鈥榥on-residential鈥� or wholly residential and Note 9 does not apply. |
| 2 | Does the conversion of the building create an additional dwelling or dwellings? (By additional, we mean increasing numbers from one or more but not from zero to one or more) | Yes, then relief is available for the dwelling or dwellings created entirely within the non-residential part. No, then no relief is available. |
皇冠体育app Court of Appeal in Ivor Jacobs ([2005] STC 1518) supports having to compare the number of dwellings in the whole of the building pre-conversion with the number post-conversion. LJ Ward said of Note 9 that:
In my judgment, Note 9 has to be construed so that the result of the conversion is to create in the building an additional dwelling or dwellings.
For grants in a building (or part of a building) converted for use solely for a 鈥榬elevant residential purpose鈥� the provision is Item 1(b) (VCONST04200).