VAT – Zero rating – Appellant owning blocks of flats – Construction of further flats in roof spaces of blocks – Application to register for VAT for zero-rated taxable supplies – Item 1(b) in Group 5 of Schedule 8 to Value Added Tax Act 1994 – Respondent refusing registration and deciding works exempt supplies not zero-rated – Whether works amounting to conversion of non-residential part of building into building designed as number of dwellings so as to qualify for zero rating – Appeal allowed
The appellant owned the freehold of five blocks of flats with pitched roofs. The roof space was unused save that cables passed through for connection to roof-mounted television aerials. The appellant planned to construct new flats in the roof spaces and applied to register for VAT on the basis that it was intending to make zero-rated taxable supplies. It argued that it was “converting a… non-residential part of a building into a building designed as a… number of dwellings” within item 1(b) of Group 5 in Schedule 8 to the Value Added Tax Act 1994. Refusing the application, the respondent commissioners took the view that the works would not fall within item 1(b) since the roof space was integral to the residential part of the building and was not therefore a “non-residential part of the building”. On appeal from that decision, the appellant relied upon the fact that the roof space was not designed or adapted for living in and none of the lessees of the flats had rights of access to the roof space. It argued that its interpretation was consistent with the purpose of the legislation, which was to zero-rate the construction of new dwellings.
Decision: The appeal was allowed.
The roof space of each building was a “non-residential part of a building” within the meaning of item 1(b). The roof spaces could not be regarded as being residential since they were empty, no one had ever lived in them or treated them as home, they had never been habitable and no one apart from the appellant could access them. They were not constructed or adapted for use as dwellings and had never been intended or used for residential occupation. They were not dwellings or parts of dwellings. It was not part of the statutory test to ask whether the roof spaces were integral to the residential part of the building. In any event, the roof spaces were not integral since they did not contain utilities that were necessary for the residents to be able to dwell in the flats below and the residents had no access to them for storage or any other purpose. The roof spaces were a “non-residential” part of a building and the result of the conversion would be to create additional dwellings. The intended supplies of the appellant fell within item 1(b) and would be zero-rated taxable supplies for which the appellant should be registered for VAT.
Timothy Brown (instructed by Constable VAT Consultancy LLP) appeared for the appellant; Alexander Ruck Keene (instructed by the legal department of HM Revenue & Customs) appeared for the respondents.
Sally Dobson, barrister
