# The Value Added Tax (Buildings and Land) Order 2011, Note: Explanatory note


(This note is not part of the Order)
This Order amends paragraphs 15, 15A and 16 of Schedule 10 (“the Schedule”) to the Value Added Tax Act 1994 (c. 23) (“the Act”). It also substitutes new paragraphs 35 to 37 of the Schedule. It comes into force on 1st March 2011. Articles 4 to 7 of this Order have effect in relation to supplies made on or after 1st March 2011 other than a supply arising from a grant made before that date. Article 8 has effect in relation to buildings completed on or after 1st March 2011.
Part 1 of Schedule 10 to the Act makes provision for a person to opt to tax any land. Paragraph 2 of that Schedule provides that the effect of an option to tax is that supply of land, which is exempt, becomes taxable. Paragraphs 12 to 17 of Schedule 10 are anti-avoidance provisions which prevent the application of the option to tax by developers of land in certain circumstances. Articles 4 to 7 of these regulations provide relief from those provisions. The effect of the Articles is that the option to tax will not be disapplied where a development financier or a person connected to the development financier occupies 10% or less of any building included in the grant. Further, it will not be disapplied where a grantor or a person connected to the grantor occupies 2% or less of any building included the grant. It will not be disapplied in either scenario where the only occupation of the person concerned (“P”) is in relation to an automatic teller machine of P.
Article 4 substitutes a new sub-paragraph (3A) in paragraph 15. The new provision provides that where a person (“P”) is in occupation of the land at any time before the end of the relevant adjustment period as defined in the Schedule, P is treated as not in occupation of the land for the purposes of sub-paragraph (2) at that time if certain building occupation conditions are met, or if the occupation arises solely by reference to any automatic teller machine of P.
Article 5 amends sub-paragraph (2) of paragraph 15A to provide that occupation by a person connected with P is treated as occupation by P unless that occupation is wholly, or substantially wholly, for eligible purposes. Article 5 also substitutes a new sub-paragraph (4) of paragraph 15A, and amends the building occupation conditions to introduce a “maximum allowable percentage” that P may occupy in order to be treated as not in occupation of the land. If P is a grantor or a person connected to the grantor, the maximum allowable percentage is 2%. If P is a development financier or person connected to a development financier, the maximum allowable percentage is 10%. The new sub-paragraph (4) also defines “relevant building”, and excludes any building that P occupies solely by reference to any automatic teller machine of P. The new sub-paragraph (6A) applies the same criteria as paragraph 15(5) to determine whether occupation is wholly, or substantially wholly, for eligible purposes.
In the light of the amending provisions in Articles 4 and 5 which treat P as not being in occupation of land where it arises only as a result of any automatic teller machine of P, paragraph 16(7), which treated such occupation as occupation for eligible purposes, is no longer needed, and is therefore omitted.
Paragraphs 35 to 37 make provision for when and how a charge to VAT will arise in circumstances where the construction of, or grant of an interest in, a building (“premises”) has been zero-rated on the basis of its intended use (“a relevant purpose”) and that use changes after the grant has been made.
Under the previous provisions, the charge to tax and the method of calculation of the charge differed depending on whether or not the recipient of the zero-rated supply subsequently granted an interest to a third party. Where a change in use occurred in an unidentifiable part of the premises, the charge arose on the entire premises or part of the premises.
Article 3 substitutes new paragraphs 35 to 37. The new paragraphs provide for a uniform application of the charge to VAT and a single method for its calculation as follows.
Paragraph 35 sets the context and provides additional definitions to aid interpretation.
Paragraph 36(1) provides for a charge to arise on each occasion that there is an increase in the use of the premises for a non-relevant purpose.
Paragraph 36(2) provides there is a charge to VAT where a person disposes of the entire interest in the premises or in a part of the premises.
Paragraph 36(3) provides that there is a charge to VAT where an identifiable area of the premises, or of a part of the premises, is used by a person in occupation of the premises (or part) for a non-relevant purpose.
Paragraphs 36(4) and (5) apply where use is made of the premises (or of part of the premises) for both a relevant and a non-relevant purpose. The proportion of use for a non-relevant purpose is to be calculated in the same proportion as if an identifiable part of the building were used for a non-relevant purpose.
Paragraph 36(6) treats the premises as being used for a relevant charitable purpose where the premises are a village hall or similar even though the occupier may not be using the premises for a charitable purpose.
Paragraph 37 provides for the charge to VAT and makes provision as to how the supply is to be valued.
A full and final Impact Assessment has not been produced for this instrument as a negligible impact on the private or voluntary sectors is foreseen.

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Source: https://www.legislation.gov.uk/uksi/2011/86/note (the official version)
Page: https://openlegislation.uk/value-added-tax-buildings-and-land-order-2011/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.