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The taxpayer company a joinery-and-building business built kit houses using main contractors.
It was asked to erect new offices for KS Ltd. At a meeting between the two parties the client said the contract was to be treated as zero rated for VAT because the building would double as a dwelling house to highlight the lack of council accommodation in the area.
Subsequently KS Ltd made payments without VAT to the taxpayer to a total of £57 150.
At a VAT inspection at the taxpayer’s premises HMRC concluded the tax was payable in respect of the contract works and the department assessed amount at £8 511 because the works were described in the planning application as ‘erection of office storage portakabin boundary walls and formation of yard’.
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