Alternation or conversion

Zero rating on renovation of building

The taxpayer owned a coach house which it renovated by demolishing the whole building apart from two external walls and part of a third. The issue was whether zero rating applied to the work. HMRC said the redevelopment constituted the ‘conversion reconstruction or alteration of an existing building’ under VATA 1994 Sch 8 Group 5 note 16(a) so zero rating did not apply. The taxpayer said the work did not meet those descriptions and it should be zero rated within items 2 and 4.

The First-tier Tribunal allowed the taxpayer’s appeal. HMRC appealed.

The Upper Tribunal said the first tribunal’s approach was flawed because it had applied the relevant provisions in the wrong order. It had considered note 16 without reference to note 18 which defines ‘existing building’.

The works were clearly construction but what had to be considered...