HM Customs and Excise 2
17 March 1998
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SCOTTISH HOUSING ASSOCIATIONS TO BENEFIT FROM VAT CHANGES
The Chancellor announced today that developers in Scotland who
convert commercial buildings into residential properties will
have an equivalent right to reclaim VAT as developers in the
rest of the UK. This will particularly benefit Scottish
Housing Associations.
DETAILS
1. The change affects developers who convert commercial
buildings into residential properties. Currently they
can reclaim any VAT incurred during the conversion if
they intend to sell the residential property. The same
applies if that property is to be let on a long lease of over
21 years. Scottish land law effectively prevents leases of
more than 20 years, so until now developers in Scotland who
were unable to sell the property could not reclaim the VAT.
This change will allow developers to claim a refund of VAT
on the first sale or long lease of not less than 20 years.
2. The change will take effect from Royal Assent to the
Finance Bill.
NOTES FOR EDITORS
1. The construction of new houses is zero rated so the
builder or developer does not charge the house buyer any VAT.
If the house is sold outright or leased on a long lease (21
years or longer) the builder/developer can reclaim the VAT on
the building costs.
2. Because of Scottish law, builders and developers
converting non-residential property they own into residential
property which they then lease, cannot reclaim VAT they
incur. In contrast, builders working directly to a Housing
Association can zero rate their conversion services,
therefore the Housing Associations incur no VAT.
3. Housing associations often have schemes to lease
converted properties from builders rather than buying them
outright. In such cases, the current law has adversely
affected their VAT position and some of them have not gone
ahead because of the obstacles.
4. Until now, Customs have treated Scottish leases of 20
years in the same way as 21 year leases in England on a case
by case basis and Customs will continue this policy for
leases made before the Finance Bill receives Royal Assent.
This will allow developers to reclaim VAT incurred on such
conversions.
5. Details for traders are available in Budget Notice BN
59/98, which is available from Customs and Excise Business
Advice Centres and from the Customs and Excise Internet site.
Press enquiries only to HM Customs and Excise, Public
Relations Office, New King's Beam House, 22 Upper Ground,
London, SE1 9PJ.
Others should contact their local VAT Business Advice Centre,
listed under Customs and Excise in the telephone book.
Customs and Excise Internet address:
www.hmrc.gov.uk
This news release can also be found at :
www.hm-treasury.gov.uk. Other Treasury material can
also be found at this address.