The Value Added Tax (Construction of Dwellings and Land) Order 1990

Explanatory Note

(This note is not part of the Order)

Article 2 of this Order substitutes a new Note (7) in Group 8 of Schedule 5 to the Value Added Tax Act 1983 (c. 55.). The new Note excludes from zero-rating any supply by a developer of a dwelling, and now a site for a dwelling, where the owner or lessee is not entitled to live throughout the year because the terms of the sale or lease so prevent or residence throughout the year or use of the dwelling as a principal private residence is prevented by the terms of a covenant, statutory planning consent or similar permission.

Article 3 amends Group 1 of Schedule 6 to the Value Added Tax Act 1983. Paragraph (d) in item 1 and Note (10) are substituted, and two additional Notes (10A) and (10B) are inserted. Paragraph (d) excludes from exemption, and thus standard-rates, any supply of holiday accommodation without regard to the length of the term granted. “Holiday accommodation” is redefined in Notes (10), (10A) and (10B). Note (10) has the effect of taxing:

(a) supplies excluded from zero-rating by Note (7) to Group 8 of Schedule 5 to the Value Added Tax Act 1983, and

(b) supplies of sites for holiday accommodation.

Note (10A) exempts from value added tax the freehold or leasehold sale of holiday accommodation which is not newly constructed. Note (10B) redefines “holiday accommodation” to include beach huts and chalets, as well as any accommodation in a building, caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use, but makes it clear that hotel and similar accommodation is not taxed under this paragraph.