Apportion the supply

The taxpayers converted their main residence into two semi-detached properties. The couple lived in the one of the properties but sold the other.

The floor space of the property that was sold consisted of 35% of the original property with the remainder being newly constructed.

HMRC refused the taxpayers’ application to be registered for VAT as intending traders so that the building work could be zero rated.

The department's decison was on the on the basis that the taxpayers had converted an existing building which under VATA 1994 Sch 8 group 5 note 16 meant zero rating could not apply.

The taxpayers appealed.

The First-tier Tribunal said the work carried out by the taxpayers amounted to an enlargement of the existing building as opposed to a conversion or alteration. The chairman said  it was clear an additional building had...