VCONST03440 - Zero-rating major interest grants in buildings: holiday homes: what 鈥榩rincipal private residence鈥� means
A 鈥榩rincipal private residence鈥� is a dwelling that would be lived in as a sole or main residence throughout the year. Even if the building can be 鈥榬esided鈥� in for the whole of the year, zero-rating must be denied if the recipient of the grant (the grantee) is prevented from using it as a 鈥榩rincipal private residence鈥�.
A dwelling, which, in effect, is a 鈥榮econd home鈥�, is not disqualified under this test unless it is not possible to use it as a 鈥榩rincipal private residence鈥�.
In Loch Tay Highland Lodges Limited (VTD 18785), a condition of the grant was that the dwelling 鈥榮hall be used solely for holiday accommodation and shall not be occupied as the sole or main residence of any occupant鈥�. In dismissing the appeal the Tribunal said:
We consider that there is no material difference between 鈥榮ole or main residence鈥� and the statutory phrase 鈥榩rincipal private residence鈥�.
During the hearing the appellant also argued that the Tribunal decision in Livingstone Homes UK Ltd (VTD 16649) should be followed. It was decided there that a condition that limited the grantee to use the dwelling as a 鈥榟oliday dwelling house only and for no other purpose鈥� did not restrict him from using it as a 鈥榩rincipal private residence鈥�. But the Tribunal in Loch Tay agreed with us that the Livingstone Homes case was wrongly decided, saying:
In our view, the Tribunal has ignored the word 鈥榦nly鈥� and the phrase 鈥榝or no other purpose鈥欌�� It does not matter whether use as a holiday house or a principal private residence are compatible. They may be compatible but they are not the same. The only permitted use is as a holiday house. Nothing else.