Explanatory note

This Order amends Schedule 10 to the Value Added Tax Act 1994.

Group 5 of Schedule 8 to that Act applies the zero rate of VAT to supplies relating to certain buildings which are intended for use solely for a relevant charitable or a relevant residential purpose. If the use of a building originally zero-rated under these provisions is changed to use for other purposes within 10 years of its completion, a standard-rated supply is deemed to have been made both to and by the charity or other person using the building. This self-supply is created by paragraph 1(5) of Schedule 10. The value of the self-supply is calculated in accordance with paragraph 1(6) of Schedule 10.

This Order amends the method of calculating the value of the supply given in paragraph 1(6) of Schedule 10. Whereas at present the calculation method gives a value which means that all of the original VAT saved by zero-rating has to be accounted for, the new formula allows a reduction in the value (and the corresponding VAT) by one tenth for each complete year of relevant charitable or relevant residential use before the change of use occurs.