VAT: Construction work to residential personal care home zero rated

A hospital is an institution within (a) building(s) providing medical treatment and associated care, usually on a short term basis for the treatment, cure or betterment of a medical condition. Work in the construction of such a building is disqualified from VAT zero rating under Section 30(2) and Item 2 and Note 4 of Group 5 to Schedule 8 of the Value Added Tax Act 1994.

The disqualification applies to “use as a hospital, a prison or similar institution or an hotel, inn or similar establishment”.

But the recent First-tier Tribunal (Tax) case of Pennine Care NHS Trust v Revenue and Customs [2016] said you need to distinguish from this a home or institution providing residential accommodation with “personal care” for those needing it – usually by way of long-term residence. They said much turns on the facts but the hospital etc disqualification does not necessarily apply to this. In that case the construction work was zero rated and the NHS Trust could not be required to pay VAT on it.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.