There is no direct correlation between the PRR rules and the application of VAT on the construction and sale of dwelling-houses.

The construction and first-time sale of a new house by a builder will normally be a zero-rated supply (VATA 1994, Sch. 8, Grp. 5, item 1 and 2); any subsequent sale of an existing house will normally be an exempt supply (VATA 1994, Sch. 9, Grp. 1, item 1).

Both zero-rating and exemption are determined by the building being ‘designed as a dwelling or number of dwellings’ as defined in Sch. 8, Grp. 5, Note (2), regardless of whether or not the dwelling is, or is intended to become, anyone’s main residence.

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