Relevant Residential Building (RRP) or Relevant Charitable Building (RCP) use for COVID-19 related activities.

As you are aware, charities have been concerned that the “change of use”, anti-avoidance VAT legislation will be triggered if a building that had been zero-rated and certified as a Relevant Residential Building (RRP) or Relevant Charitable Building (RCP) is used for COVID-19 related activities.

CTG wrote to its contact at HMRC asking for blanket confirmation that the self-supply will not be applied.  HMRC has advised CTG that charities need to contact HMRC and that each instance will be looked at on a case by case basis.

Public Notice Buildings and construction (VAT Notice 708) has been updated to include this comment:

If the use of a certificated building changes or the building is disposed of, as a direct result of coronavirus (COVID-19), and a self-supply charge is due, you should contact HMRC through your customer compliance manager or the charities compliance team by email:

wmbchfesector@hmrc.gov.uk

For more information about change of use charges, see paragraph 15.6 and section 19.

CTG, Martin Scammell and BUFDG have been discussing this issue.  CTG is currently deciding how to respond to HMRC and we will provide updates when available.  In the meantime, BUFDG will continue to request a response to its Policy Paper on COVID-19 related activities (which is currently with HMRC Policy).

So what do you need to do now?  BUFDG has prepared the attached flowchart to help you decide if you MAY have triggered the self-supply charge.

There are a few points to note:

• The dwelling treatment will only apply to the residential areas of a building – it will not apply to areas such as bars, laundries, etc;
• If you are concerned that you will trigger the self-supply charge, consider minimising the exposure – for example, limit non-qualifying use to certain areas of a building , such as one floor or a particular lab; only let the same rooms for non-student use;
• Even if the self-supply is triggered, it may be possible to reclaim some of the VAT incurred, depending on the VAT liability of the non-qualifying activity;
• If you “acquired” the building via a Z/R lease rather than by building it or acquiring the freehold, then you probably have no or negligible liability anyway. For those that have it, Martin’s book has a general explanation of this point at P26.9.2, but please let him know at martinscammell1@gmail.com if you need a copy of the extract (there is no charge for this).;
• There are differences in how the self-supply is triggered for buildings that were completed within the last ten years, but pre-1/3/2011.

Finally, Andrea would be grateful if you could e-mail her with instances of where you have used RRP/RCP buildings for COVID-19 related activities.  Even if you have resolved the issue, BUFDG would benefit from an overview of this problem in the sector. These will be treated anonymously.