No Gold, No Bricks – How can it be VAT Zero-Rated?

New-build residential construction (eg houses, apartments, care homes, student accommodation, etc) can be zero-rated for VAT purposes; and part-complete residential development can qualify as well.

But what about a transaction which is intentionally timed to occur before completion of the residential development has happened – ie the ‘Golden Brick’ scenario?

It’s true to say that ‘Golden Brick’ means different things to different people. Some say that you need to lay just one course of bricks above foundation level; or, that there has to be one course of bricks above damp proof course level. In fact, there is nothing as prescriptive as this in HMRC’s published guidance.

Moreover, contemporary building techniques (eg steel frameworks, extensive use of glass, etc) means that, very often, there aren’t that many actual bricks involved at all, at least not in the early stages of development.

If there are no bricks, then, there can’t be a Golden one. So, what to do?

HMRC’s guidance talks about ‘when walls begin to be constructed’, and surely something like a steel construction and the framework for a building is as much the start of construction of a wall as would be brick upon brick?

In fact, the key consideration is: does it look like a residential property is being built? You certainly need to do more than dig out foundations, or prepare the ground for development. However, if there is clearly a building, with walls visible (whatever they’re made of), this should pass muster. And, of course, it would be prudent to evidence this with photographs, etc, at the time of the transaction.

Every development will be different, and there is no one-size fits all, so you should take specialist advice. But even without Bricks, you could still go for Gold(en)!

To discuss your development and for further advice, please contact Jim Gempton, VAT Director.

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