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HMRC internal manual

VAT Construction

Zero-rating major interest grants after a non-residential conversion: is the building the subject of a ‘non-residential conversion’: conversion of a garage into a qualifying building

A garage occupied together with a dwelling at any time in the 10 years immediately preceding the grant of a major interest in the converted building, is not a non-residential building and can’t be the subject of a qualifying conversion in its own right. This is confirmed by Schedule 8, Group 5, Note 8.

By occupation, we mean the right to occupy the building as an owner and to exclude any other person from enjoyment of such a right.

A garage that has not been occupied together with a dwelling at any time within that 10 year period is a non-residential building.

Converting a building that is in part a garage occupied together with a dwelling and in part a non-residential building into a qualifying building will not be the subject of a non-residential conversion if the post-conversion building incorporates some if not all of the garage. This interpretation has been supported by the First Tier Tribunal in the case of Joseph Podolsky (TC00322) where they stated:

The evidence of Mr Wakeley makes it clear that Paddock House prior to its conversion was in part residential and in part non-residential. It was accepted by the Appellant that a small part of the building was used by Mr Wakeley to park his car together with housing for agricultural equipment vans and tractors. It was therefore decided that at least part of the subject building qualified as a garage occupied within the a ten year period together with the farmhouse dwelling of Pope’s Hall

The First Tier Tribunal in the case of John Clark (TC00552) did not support the above interpretation. However in HM Revenue & Customs (HMRC) view, the Tribunal decided wrongly and our policy is unchanged.