VAT issues on new build student accommodation


Following a successful challenge to HMRC’s VAT policy on new build student accommodation, developers should be aware that HMRC is not always correct. With the continued growth of student accommodation in the North West significant savings could be made if you get things right. It is well worth knowing about this implication of a 2018 landmark case.

In 2018, Summit Electrical Installations Limited successfully challenged an HMRC policy. Summit provided electrical services to main contractors working on student accommodation and had zero-rated their services on a new build development in Leicester. HMRC appealed the right of Summit to zero-rate its services and lost.

In theory, the whole matter could have been resolved without an appeal had Summit simply issued VAT only invoices to its customer who would have then been able to reclaim the VAT. The issue for Summit was that its customer refused to pay VAT on the works.

The main contractor on the scheme had obtained a certificate from the developer-landlord claiming relief from VAT because the new building would be used for a relevant residential purpose (RRP) – a communal building for students. Sub-contractors working on RRP buildings must usually charge VAT at 20% on their services.

HMRC argued that Summit were not in the position of making a supply to the user of the student accommodation and therefore could not apply the VAT zero-rate.

The developer of the scheme argued that student accommodation has changed hugely and nowadays the accommodation they were creating involved the construction of units which were designed as self-contained living accommodation including kitchenettes and en-suite bathroom facilities.

Summit therefore argued that the VAT zero-rate could be applied as they were working on ‘dwellings’. The relief for dwellings is broader than for RRP buildings and entitles both main and sub-contractors to zero-rate their services.


The decision by the Tax Tribunal demonstrates that zero-rated dwellings are capable of being constructed even where planning consent restricts occupation to students of universities so planners can be bolder in defining and limiting the class of residents of a new build development, without creating unexpected tax problems.

The outcome of this case will delight main contractors in the student accommodation sector because had HMRC won, main contractors would have been forced to pay VAT to subcontractors. Although this VAT would have been reclaimable, the amounts involved can be large and the impact on cash flow impact can be detrimental.

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Carolyn Van Hecke

Carolyn Van Hecke

  • Senior VAT Manager
  • Cowgills