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HMRC internal manual

VAT Construction

HM Revenue & Customs
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Zero-rating the construction of buildings: is a building being constructed: Tribunal decisions on Notes 16 and 18

In addition to the cases described in the rest of this section, some of the decided cases on Notes 16 and 18 include:

  • in Mr and Mrs G Drennan (VTD 15153), the appellant demolished two walls of a former lounge of a dwelling and considerable works on the interior including the floor. It was contended that the part of a building being worked on could not be deemed to be a dwelling because it fell below the tolerable standards specified in the Housing Acts and had been built without planning consent by the previous owner. The appeal was dismissed.

Note: This decision confirms that the correct test is whether the work is to an existing building, not an existing dwelling. Note 16(b) did not apply in this case, as the work did not create an additional dwelling.

  • in John William Shields (VTD 15154), the appellant carried out extensive works to two derelict listed cottages. The entire internal accommodation was altered and made new and certain demolition work took place. It was contended that 90 per cent of the property was brand new inside and 20 per cent of the exterior had been demolished. The work as disclosed by the plans produced did not involve either demolition to ground level or the part remaining above level consisting of no more than a single façade. The appeal was dismissed.
  • in Mr G Bremner (VTD 15309), the appellant restored a recently built house that had been badly damaged by fire. Because the original building was less than two years old at the time of the fire, the original planning application was maintained in respect of the rebuild. The appeal was dismissed.
  • in Mark Tinker (VTD 18033), the appellant completely rebuilt a house in two stages. This was because he did not have sufficient capital to carry out the exercise in one development and it was considered that it would have an easier route through 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 reconstructed. The appeal was dismissed.