Paragraph 1

For Group 8 (construction of buildings etc.) of Schedule 5 (zero-rating)to the M1Value Added Tax Act 1983 there shall besubstituted—

“Group 8—Construction of Dwellings, Etc.

Item No.

1

The grant by a person constructing a building—

(a)

designed as a dwelling or number of dwellings; or

(b)

intended for use solely for a relevant residential purpose or a relevantcharitable purpose,

of a major interest in, or in any part of, the building or its site.

2

The supply in the course of the construction of—

(a)

a building designed as a dwelling or number of dwellings or intended foruse solely for a relevant residential purpose or a relevant charitablepurpose; or

(b)

any civil engineering work necessary for the development of a permanentpark for residential caravans,

of any services other than the services of an architect, surveyor or anyperson acting as consultant or in a supervisory capacity.

3

The supply to a person of—

(a)

materials; or

(b)

builders’ hardware, sanitary ware or other articles of a kind ordinarilyinstalled by builders as fixtures,

by a supplier who also makes to the same person supplies within item 2 ofthis Group or Group 8A below of services which include the use of thematerials or the installation of the articles.

Notes:

(1)

“Grant” includes assignment.

(2)

“Dwelling” includes a garage constructed at the same time asa dwelling for occupation together with it.

(3)

Use for a relevant residential purpose means use as—

(a)

a home or other institution providing residential accommodation forchildren;

(b)

a home or other institution providing residential accommodation withpersonal care for persons in need of personal care by reason of old age,disablement, past or present dependence on alcohol or drugs or past or presentmental disorder;

(c)

a hospice;

(d)

residential accommodation for students or school pupils;

(e)

residential accommodation for members of any of the armed forces;

(f)

a monastery, nunnery or similar establishment; or

(g)

an institution which is the sole or main residence of at least 90 percent. of its residents,

except use as a hospital, a prison or similar institution or an hotel,inn or similar establishment.

(4)

Use for a relevant charitable purpose means use by a charity in either orboth of the following ways, namely—

(a)

otherwise than in the course or furtherance of a business;

(b)

as a village hall or similarly in providing social or recreationalfacilities for a local community.

(5)

Where part of a building is designed as a dwelling or number of dwellingsor intended for use solely for a relevant residential purpose or a relevantcharitable purpose (and part is not)—

(a)

a grant or other supply relating only to the part so designed or intendedfor such use (or its site) shall be treated as relating to a building sodesigned or intended for such use;

(b)

a grant or other supply relating only to the part neither so designed norintended for such use (or its site) shall not be so treated; and

(c)

in the case of any other grant or other supply relating to, or to any partof, the building (or its site), an apportionment shall be made to determinethe extent to which it is to be so treated.

(6)

Where all or part of a building is intended for use solely for a relevantresidential purpose or a relevant charitable purpose—

(a)

a supply relating to the building (or any part of it) shall not be takenfor the purposes of item 2 or 3 as relating to a building intended for suchuse unless it is made to a person who intends to use the building (or part)for such a purpose; and

(b)

a grant or other supply relating to the building (or any part of it) shallnot be taken as relating to a building intended for such use unless before itis made the person to whom it is made has given to the person making it acertificate in such form as may be specified in a notice published by theCommissioners stating that the grant or other supply (or a specified part ofit) so relates.

(7)

The grant of an interest in, or in part of, a building designed as adwelling or number of dwellings is not within item 1 if—

(a)

the interest granted is such that the grantee will not be entitled toreside in the building, or part, throughout the year; or

(b)

residence there throughout the year will be prevented by the terms of acovenant, statutory planning consent or similar permission.

(8)

Where the major interest referred to in item 1 is a tenancy orlease—

(a)

if a premium is payable, the grant falls within that item only to theextent that it is made for consideration in the form of the premium; and

(b)

if a premium is not payable, the grant falls within that item only to theextent that it is made for consideration in the form of the first payment ofrent due under the tenancy or lease.

(9)

The reference in item 2 to the construction of a building or work does notinclude a reference to—

(a)

the conversion, reconstruction, alteration or enlargement of an existingbuilding or work; or

(b)

any extension or annexation to an existing building which provides forinternal access to the existing building or of which the separate use, lettingor disposal is prevented by the terms of any covenant, statutory planningconsent or similar permission;

and the reference in item 1 to a person constructing a building shall beconstrued accordingly.

(10)

A caravan is not a residential caravan if residence in it throughout theyear is prevented by the terms of a covenant, statutory planning consent orsimilar permission.

(11)

Item 2 does not include the supply of services described in paragraph 1(1)or 5(3) of Schedule 2 to this Act.

(12)

The goods referred to in item 3 do not include—

(a)

finished or prefabricated furniture, other than furniture designed to befitted in kitchens;

(b)

materials for the construction of fitted furniture, other than kitchenfurniture;

(c)

domestic electrical or gas appliances, other than those designed toprovide space heating or water heating or both; or

(d)

carpets or carpeting material.

(13)

Section 16(3) of this Act does not apply to goods forming part of adescription of supply in this Group.”