In HMRC v Astral [2015] UKUT 0021 (20 January 2015), the UT found that Astral had erected a new building.
Astral had built a nursing home incorporating a redundant church. It contended that the construction services were zero-rated supplies for the construction of a building designed for use for a relevant residential purpose (VATA 1994 sch 8 group 5 item 2). HMRC however considered that Astral had only extended the building so that the works were standard rated.
Astral had purchased a site, including a church, a presbytery and several outbuildings. It had obtained permission for the building of a care home and the demolition of all the buildings except for the church (which was to be used for a purpose ancillary to the residential care home). The original church building formed the main entrance and reception area for the nursing home; it also included a new mezzanine floor. After the works, the floor area of the original church, including the mezzanine floor, was 455 square metres. The floor area of the new parts was 2,910 square metres.
The UT rejected HMRC’s contention that only the erection of a new building ‘as a whole’ amounted to the construction of a building. Agreeing with the FTT (and applying Marchday Holdings [1997] STC 272), the UT observed that ‘the question of whether the construction of a new building or buildings connected to the church was an enlargement or extension to the church is a question of fact, degree and impression’. The UT found that the work constituted the construction of a building.
Finally, the UT found that if the works had not amounted to the construction of a new building, they would have constituted a special residential conversion, subject to a reduced rate (VATA 1994 Sch 7A group 6), as after the conversion, the converted premises (the church) formed the entirety of the nursing home.
Why it matters: The case confirms that the answer to the question of whether a new building has been built (rather than an existing building extended) is very much a question of fact and degree. The fact that the original building represented less than a sixth of the new building was a key factor in favour of the taxpayer.
In HMRC v Astral [2015] UKUT 0021 (20 January 2015), the UT found that Astral had erected a new building.
Astral had built a nursing home incorporating a redundant church. It contended that the construction services were zero-rated supplies for the construction of a building designed for use for a relevant residential purpose (VATA 1994 sch 8 group 5 item 2). HMRC however considered that Astral had only extended the building so that the works were standard rated.
Astral had purchased a site, including a church, a presbytery and several outbuildings. It had obtained permission for the building of a care home and the demolition of all the buildings except for the church (which was to be used for a purpose ancillary to the residential care home). The original church building formed the main entrance and reception area for the nursing home; it also included a new mezzanine floor. After the works, the floor area of the original church, including the mezzanine floor, was 455 square metres. The floor area of the new parts was 2,910 square metres.
The UT rejected HMRC’s contention that only the erection of a new building ‘as a whole’ amounted to the construction of a building. Agreeing with the FTT (and applying Marchday Holdings [1997] STC 272), the UT observed that ‘the question of whether the construction of a new building or buildings connected to the church was an enlargement or extension to the church is a question of fact, degree and impression’. The UT found that the work constituted the construction of a building.
Finally, the UT found that if the works had not amounted to the construction of a new building, they would have constituted a special residential conversion, subject to a reduced rate (VATA 1994 Sch 7A group 6), as after the conversion, the converted premises (the church) formed the entirety of the nursing home.
Why it matters: The case confirms that the answer to the question of whether a new building has been built (rather than an existing building extended) is very much a question of fact and degree. The fact that the original building represented less than a sixth of the new building was a key factor in favour of the taxpayer.
