In Revenue & Customs Brief 13 (2016) and a modified version of VAT Notice 708, HMRC has set out its change of policy in relation to the VAT treatment of dwellings comprised of more than one building.

In the wake of the First-tier Tribunal’s (FTT) decisions in Catchpole v HMRC5 and Fox v HMRC6, HMRC now accepts that more than one building can form a single dwelling in circumstances where the buildings are designed to function together.

This change of policy will have implications for construction projects where multiple buildings are constructed or converted as part of a single project.

Where construction takes place in stages, HMRC will treat the later buildings as annexes to the original building which will not benefit from zero-rating unless:

  • they are on the same site
  • the stages are completed without unreasonable delay
  • none of the buildings are occupied until after all the building work is completed.

For projects which have taken place during the last four years, taxpayers should consider if they have a claim for the repayment of overpaid VAT.

Revenue & Customs Brief 13 (2016) can be found here.

VAT Notice 708 can be found here.