HMRC have recently confirmed their stance on ‘lost space’ in relation to the creation of bathrooms using an existing room in a disabled persons home – this was previously known as ‘restitution relief’.
Previously HMRC’s stance was “you may also zero rate the service of restoring that room elsewhere in the building to its original size”. This was removed from their guidance in 2014 and the position has been unclear ever since, although they had stated on a number of occasions that the relief was still applicable on ‘a case by case basis’.
The latest guidance leaves much less room for relief and only allows Zero Rating when the lost space is regained by extending the room in its original position within the house “This can be done through internal works or by extending outwards or upwards”.
This means that if the installation of a bathroom leads to a room being moved elsewhere in the house, we can no longer seek relief “converting another room in the residence to replace the lost room, will be standard-rated.”
This relief can be retrospectively applied to any scheme starting after December 2014, and we will be ensuring that we are applying this latest guidance to all schemes going forward.
If you have any questions please do not hesitate to contact a member of the Private Clients team.