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HMRC internal manual

VAT Construction

Zero-rating the construction of buildings: is a building being constructed: demolition test

Note 18 requires any pre-existing building to be demolished to ground level. Ideally that building should be completely demolished before work to construct a new building is started. This view was supported by the Tribunal in Alec A Bugg (VTD 15123).

However, under certain circumstances we will accept the demolition test as being passed should construction start before demolition is complete. So long as at no time does the new building under construction combine with the fabric of the pre-existing building, we will see the test as being passed.

This approach has been supported by the Tribunals in ED Bruce (VTD 6326) and Mark Tinker (VTD 18033).

In ED Bruce, the appellant replaced a farmhouse in two operations of partial demolition followed by construction. Construction was adjacent but separate from the remainder of the original building, with the gap between the two protected from the elements by temporary corrugated iron sheeting and slates. The second phase saw the house constructed to completion following demolition of the rest of the original farmhouse.

The Tribunal did not consider the works to be work to an existing building.

In Mark Tinker, the appellant completely rebuilt a house in two stages. This was because he did not have sufficient capital to complete the undertaking as a single operation; and it was considered that he would have an easier task obtaining planning approval.

In 1997 an existing kitchen was demolished in order that an extension could be built. In 2000 new planning permission was obtained allowing the remainder of the original building to be demolished and new main living and sleeping accommodation to be built.

The Tribunal considered the works to be work to an existing building.