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HMRC internal manual

VAT Construction

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HM Revenue & Customs
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Zero-rating the construction of buildings: is a building being constructed: treatment of loft conversions

Normally, we would not consider a conversion of a loft or roof void into a dwelling or number of dwellings to be the enlargement of an existing building to create an additional dwelling or dwellings. This is because some or all of the dwelling created incorporates part of the existing building, that is the roof void. It cannot be said that the dwellings are created entirely within an enlargement or extension of the existing building.

We would say that this is the case even where the roof is removed. However the Tribunal does not agree with us.

In AK Jahansouz (TC00637), the appellant added an additional flat to a detached Victorian house, which had previously been converted into two flats. The works consisted of removing the existing low pitched roof and replacing it and a flat-roofed area with a new larger high pitched roof, albeit one whose axis had been turned 90 degrees so as to form a gable end. In the larger space created, the appellant installed a self-contained flat.

HM Revenue & Customs (HMRC) argued that the new flat had been created partially out of the space that had been enclosed by the original roof and so couldn’t be said to be have been created wholly out of the enlargement.

The Tribunal disagreed. They stated:

If HMRC are correct in their interpretation in our view only people with flat roofs could ever reclaim the VAT for building a new flat on top of an existing building. Anyone with a pitched roof would only ever be considered to be building a loft conversion on top of an existing building regardless of what happened to the original pitched roof or indeed what was built on top of the existing building. This is not what the ordinary person would view as being a sensible interpretation. In particular we observe that Note 16(b) itself does not contain the words ‘wholly’.

In any case looking at the ordinary meaning of wholly it means ‘completely, totally, or entirely’. In our view Flat 37B is ‘wholly’ within the enlargement because it does not protrude outside the enlarged area or go beneath the enlarged area for instance to include part of Flat 37A.

There is no definition in statute nor guidance from the case law as to what would constitute an ‘additional’ dwelling. We are therefore left with taking a common sense view of this issue. In the original pitched roof space it is not in dispute that there was attic space (this is regardless of how big it was, who had access to it, and how such access was obtained). The original building was enlarged by taking off this pitched roof, using both the area of the flat roof and pitched roof to build a self contained flat with a kitchen, bathroom, and everything else required to make the space on top of the original building habitable and then adding a new roof. This in our view amounts to building an ‘additional’ dwelling. 

Although we do not see the dwellings resulting from loft conversions as the construction of additional dwellings, it is possible to see them as being the result of non-residential conversions, but only where the building is a building designed as a number of dwellings (VCONST04440).