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VAT on construction of new buildings for Scouting


Construction of buildings is mentioned section 6.1.3 of Notice 701/1 and covered in detail in VAT Notice 708, with items relevant to facilitating access by disabled persons covered in VAT Notice 701/7. Most VAT notices are well-written but the subject matter can be very complicated.

The following is intended as a quick introduction to the rules. However, this is a very complex area with many exceptions to general rules. Do not act solely on what is written here. Study the VAT notice or other information given by HMRC. You might also wish to contact HQ as set out below or to seek professional advice.

New buildings with ‘relevant charitable use’

If you purchase or construct a new freehold building or a building on a long lease exceeding 21 years, and it is for a ‘relevant charitable use’ then the construction cost can be zero-rated for VAT. ‘Relevant charitable use’ means it is either used solely for non-business charitable purposes or as a ‘village hall or similarly’.

The word ‘business’ has a wider interpretation in VAT legislation than usual. For many years HMRC maintained that buildings used for typical scout group activities had a ‘business’ use because payments were made by or on behalf of members to take part. That meant the only way to qualify for zero-rating was to fall within the ‘village hall’ provisions. Following long negotiations HMRC have modified their approach and many scout buildings will now be accepted as having 'non-business' use.

HMRC have recently accepted that subscriptions are not ‘business income’. If the only use of a building is scouting activities financed by subscriptions and donations, then the building has non-business use and can qualify for zero-rating subject to meeting detailed requirements.