HM Revenue and Customs have issued a notice withdrawing the extra-statutory concession relating to new student residences from 1 April 2015.
The concession allows universities and other Higher Education Institutions (HEIs) to ignore vacation use of residences when determining whether or not the residence is intended to be used solely for a ‘relevant residential purpose’ and thus zero-rated for VAT purposes.
From 1 April 2015, the actual proposed use of the residences will need to be considered and if the 95 per cent test for relevant residential use is not met, zero-rating will not apply.
This will particularly affect HEIs in London and other tourist areas that let student accommodation as B&B and similar accommodation outside term time.
Revised guidance can be found here.