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Changes to charitable building

HMRC has recently announced an important change regarding certain buildings used by charities.

Business Brief 39/09 sets out the revised treatment of buildings used by charities for non business purposes. The supply of such buildings is zero rated where the charity provides the developer with a “qualifying use” certificate. Any change of use by a Charity in the ten year period following the supply will trigger a self -supply VAT charge.

Previously HMRC allowed zero rating for such buildings where there was up to 10% business use of the building, by concession (ESC 3.29).

Following a review of this issue and recent Court decisions, HMRC now take the view that the statutory position is that a building must be used at least 95% for non business purposes to qualify for zero rating. As such the concession will be withdrawn.

A 12 month transitional period began on 1 July 2009 and during this time, charities can opt to use the concession or apply the new rules.

This change could have a huge impact on charities’ financial position. It is understood that pressure is being put on the Government to reverse this decision. However, a reversal is thought to be unlikely.



Date: 28th July, 2009
Author: Wendy Bambrick


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