Church or not?

The taxpayer company was contracted in April 2011 to build a new residential home on the site of the Holy Name Church in Kingston-upon-Hull.

The firm acted in line with the terms of the planning permission as it demolished the presbytery the social club the outbuildings and single storey extensions that had been built on the back of the premises. Only the church in its original form remained. Two new two-storey wings were built.

The original exterior was retained but the church it was altered internally; a mezzanine floor was created to contain a dayroom and gallery storage.

The ground floor consisted of a reception area office shop dayroom activity room and a small chapel. The three bedroom wings were self-contained and had dayrooms.

HMRC decided the taxpayer’s building works were chargeable to VAT at the reduced rate of 5% under VATA 1994...