Conversion of non-residential buildings into dwellings: Permitted Development Rights
HMRC have recently issued guidance on the interaction of VAT with permitted development rights (“PDRs”). PDRs permit conversion of non-residential buildings into dwellings without individual statutory planning consent. However, the definition of a dwelling for purposes of VAT reliefs requires that “statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent”.
VAT reliefs applicable in this situation might be:
• Zero rated sale of a newly converted dwelling
• Reduced rated conversion work for conversion into dwellings
• Zero rated conversion work for a housing association for conversion into dwellings
• Reclaim under DIY Housebuilders scheme
Thus if a developer is using PDRs, it would not be able to meet the conditions for VAT relief.
In their Business Brief 9/2016, HMRC have clarified their policy on situations where an individual planning application is not needed because statutory planning consent has been provided through PDRs. HMRC will continue to require evidence to be produced that the work is lawful. At least one of the following will be required
• Written notification from the local planning authority advising of the grant of prior approval
• Written notification from the local planning authority advising that prior approval is not required
• Evidence of deemed consent and evidence that the development is a permitted development (including plans, evidence of the prior use of the building, confirmation of which part of the planning legislation is relied upon for the development and a lawful development certificate where one is already held)
Developments carried out under a PDR must still meet the appropriate building standards.
If you have any queries concerning VAT reliefs for construction projects, please contact your usual contact at Centurion or Julie Rawlinson-Smith on 07805 134091 or firstname.lastname@example.org