VAT on annexe

The taxpayer and his wife lived in a cottage. They applied in 2010 for planning permission to build a replacement annexe in the grounds of their property.

Permission was granted and construction went ahead. The builder charged VAT at the zero rate for the work but HMRC decided the tax should be levied at the standard rate.

The First-tier Tribunal ruled that the new building had been designed as a dwelling and was also an annexe to the cottage. The zero rating list in VATA 1994 sch 8 group 5 note (16)(c) did not include the construction of an annexe to an existing building.

The construction work was therefore chargeable at the standard rate. The taxpayer appealed saying the tribunal had erred in law.

The Upper Tribunal said the First-tier Tribunal had applied the correct approach. Its decision had been a finding of fact that accorded entirely...