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HMRC internal manual

VAT Construction

Zero-rating the ‘approved alteration’ of a ‘protected building’: ‘alterations’ and ‘repair or maintenance’: repair or maintenance

‘Alteration’ and ‘repair or maintenance’ are not mutually exclusive concepts. Where a piece of work both alters and repairs or maintains a building, it is not an approved alteration and cannot be zero-rated.

The problem is deciding whether work is repair or maintenance when the part affected is defective but the task carried out in a way that alters the building. Whether an alteration is also a work of repair or maintenance has exercised Tribunal and higher courts since the beginning of VAT.

In Metropole (Folkstone) Ltd (VTD 19917), the Tribunal reviewed past cases and drew out the following principles:

  • repair or maintenance is a composite phase to be construed in its ordinary sense; the words are not antithesis (ACT Construction Ltd ([1982] STC 25)
  • maintenance, if one is to be permitted to consider it separately, reflects a task designed to minimise, for as long as possible, the need for, and future time scale of, further attention to the fabric of the building (Windflower Housing Association ([1995] STC 860)
  • repair or maintenance refers to the listed building as a whole, not to specific parts of it (Sutton Housing Trust ([1984] STC 352)
  • a radical and fundamental alteration to the building will not be repair or maintenance (ACT Construction Ltd ([1982] STC 25)
  • the effecting of a repair using modern building materials does not prevent the work from being repair or maintenance (Dr N D F Browne (VTD 11388)
  • if an alteration is an integral part of wider works of repair or maintenance, it should be viewed as repair or maintenance (Windflower); ‘integrality’ implying a measure of necessity (Nicholas Farrah Rhodes (VTD 14533).

To this, the Tribunal in Wanklin (Haresfield Court Tenants Association) (VTD 20133) added a further principle of proportionality to deciding if a piece of work is repair or maintenance. The Tribunal expressed itself on the point in the following terms:

We accept Mrs Wanklin’s submission that an alteration which achieves some measure of repair and maintenance is not thereby necessarily constituted repairs or maintenance…Almost any alteration of a building will give rise to some feature which will mean less future need of repair as a result of the work. The issue will be one of degree: a repair which is a consequence of a larger change will not turn the change into repair and maintenance; an alteration which is a necessary part of a repair does not prevent the works being repairs or maintenance. Between the two extremes lies a band of possibilities

VCONST10000 provides examples of cases where those principles have been applied.