Is your charity building new structures or extending its premises or has it done so in the past? In some circumstances, where a charity is building an additional structure alongside an existing structure, this may be considered an “annexe” and so may be zero-rated for VAT purposes. In order for a structure to qualify as such:
- the annexe must be capable of functioning independently from the existing building;
- the main access to the annexe must not be via the existing building; and
- the main access to the existing building must not be via the annexe.
This is known as the “main access” test.
Over the past few years, on the basis of Tribunal decisions, HMRC has adopted interpretations of what constitutes an annexe and how to apply the “main access” test. These interpretations have led to many charities failing to qualify for zero-rated VAT on their additional structures.