At an early stage in the COVID-19 crisis, the Charity Tax Group (CTG) and the British Universities Finance Directors Group (BUFDG) raised concerns (including via this letter to HMRC, para 1b) regarding changing the use of Relevant Charitable Purposes (RCP) buildings or Relevant Residential Purposes (RRP) buildings due to COVID-19 related use.

Potential issues arise where a building (or part of a building):

• has been zero-rated at the point of construction or acquisition; and
• it is less than 10 years since the completion of the building.

For RCP buildings, a change of use arises when the building or part of a building ceases to be used for non-business purposes, even on a temporary basis.  For example, a research lab used for COVID-19 testing or as academic teaching space; office space made available to the NHS; or overnight accommodation used to house key workers.

For RRP buildings, a change arises when the building is occupied by non-students.

In each case, there is a tolerance allowing up to 5% non-qualifying use.

HMRC has advised that instances will need to be looked at on a case by case basis and have indicated that there is a willingness to help provided that certain criteria are met.  It is not certain what these criteria are, but one of them appears to be that the building is “loaned” for little or no charge.

CTG and BUFDG would welcome input from charities and members who have used, or have considered using, RCP or RRP buildings for COVID-19 related activities.  For example:

• What was the original purpose of the building  and what has/will it been used for during the COVID-19 crisis?
• What (if any) charging mechanism was/will be in place for the COVID-19 related use?
• Have you raised the issue with HMRC and, if so, what was the outcome?
• Has the possibility of a VAT liability deterred or limited COVID-19 related use?

Thank you in advance for your information.  Please contact the CTG Secretariat or Andrea at BUFDG with your feedback.