This rule is in VAT Notice 708 and is useful for Residential Property Developers.
Sections 6.3.2 and 6.3.3
You cannot normally zero-rate work to a property that has previously been lived in. The exception to this is where, in the 10 years immediately before you start your work, it has not been lived in and following the work it is ‘designed as a dwelling’ or intended for use solely for a ‘relevant residential purpose’.
If the property starts being ‘used as dwelling’ or for a ‘relevant residential purpose’ whilst your work is being carried out, then any work that takes place after that point is not zero-rated.
How do I know if the building has been unoccupied for 10 years?
You may be required to show that that the building has not been lived in during the 10 years immediately before you start your work. Proof of such can be obtained from Electoral Roll and Council Tax records, utilities companies, Empty Property Officers in local authorities, or any other source that can be considered reliable.
If you hold a letter from an Empty Property Officer certifying that the property has not been lived in for ten years, you do not need any other evidence. If an Empty Property Officer is unsure about when a property was last lived in he should write with his best estimate. We may then call for other supporting evidence.
