Village halls, community centres and similar buildings for community use are eligible for a zero-rating relief that means that no VAT is payable on construction work for a new community building. The VAT is saved on the contractors’ charges, but not on the costs of architects and other professional help you may need. So you will have to pay some VAT. This does not help with repair bills – maintenance or improvements do not qualify for the zero-rating relief and so all costs of this nature will have VAT on them.

In order to qualify for the zero-rating, you cannot operate commercial activities in the community building or centre. The VAT office requires the use of the building to be predominantly community use (90%).

Recently an organisation won a case and was able to obtain the zero-rating for building works for a centre that will be used by the community for sports activities as well as meetings and groups. This has led to a tighter definition of the term “similar to village hall” when considering the use of the premises. Since 1 April 2005, you must be able to demonstrate:

• that the premises are being used by a charity
• that there is local community involvement in its operation and activities
• that it is used predominantly for social and recreational activities
• that there is no dedicated business area – for example a set of rooms kept for letting out to businesses and individuals at a premium rate
• that the users are from the locality