VIT64150 - Legal history: cases about domestic accommodation

Cupit (W) & Sons VTD 5403
Eccles (ACS) & Co VTD 2057
FJ Meaden Ltd VTD 13215
Greig (WJ & L) & Son VTD 2918
Sangster Group Ltd VTD 15544
Suregrove Ltd VTD 10740
Wright (RS & EM) Ltd VTD 12984

Please note that the following material is not a full summary of the case - it merely highlights the principle referred to in the appropriate section of this manual.

Cupit (W) & Sons VTD 5403

A family partnership ran a farm. It converted a barn into a house for one of the partners and his wife. The partnership argued that the purpose of the work was to allow the partner, who had suffered a stroke and could not walk far, to live close to the farm. HMRC argued that the costs had not been incurred for a business purpose.

The tribunal held that the conversion had a dual purpose. It also held that the business purpose was the dominant one and said that 70% of the tax on the barn conversion could be recovered.

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Eccles (ACS) & Co VTD 2057

A family partnership ran a farm and restored an old cottage. At first one of the partners lived in the cottage but later it was occupied by an employee. The tribunal held that 70% of the tax on the restoration was recoverable.

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FJ Meaden Ltd VTD 13215

A married couple had a farming company which owned a bungalow. The company renovated it so that the couple’s son, who was an employee of the company, could live in it. HMRC opposed the claim because we believed the son was ‘a person connected with a director of the company’ as defined in VAT Act 1994 section 24(3).

The tribunal held that the cost of renovating the bungalow had a dual purpose. It held that 50% of the tax on the renovation could be recovered.

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Greig (WJ & L) & Son VTD 2918

A business renovated and extended a cottage close to its main farmhouse. The tribunal allowed recovery of 70% of the input tax on the costs of renovation and extension.

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Sangster Group Ltd VTD 15544

A company owned a large house that its chairman lived in. The house was also used for business meetings. The company wanted to recover input tax on the costs of refurbishing the ground floor of the house.

The tribunal observed that there was ‘a legitimate business element in this case’ but that when the chairman stayed overnight ‘he was using the accommodation, including the ground floor, for domestic purposes.’ The tribunal also said that ‘it would be unrealistic to treat every waking hour which the chairman spent at the house as devoted to business.’

The house had been used for business purposes for 64 days in the tax year when the refurbishment costs had been incurred. The tribunal therefore adopted HMRC’s allowance of 20% recovery on the costs ‘in an effort to be fair and reasonable, avoiding troublesome calculations.’

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Suregrove Ltd VTD 10740

An oil consultancy company had its registered office in Surrey. It bought two weeks’ timeshare accommodation about 40 miles from Aberdeen which it said was to be used for meetings with clients. HMRC considered that the timeshare had been bought as holiday accommodation for the company directors.

The tribunal held that the timeshare had been bought for a dual purpose and that 25% of the tax on its purchase was deductible.

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Wright (RS & EM) Ltd VTD 12984

A farming company converted two derelict cottages into a farmhouse. The tribunal held that the farmhouse was primarily used as domestic accommodation for the company directors. However, a small part of the expenditure related to the conversion of a pigsty into an office and so 10% of the tax on the conversion of the cottages could be recovered.