In HMRC v Sibcas [2017] UKUT 298, the Upper Tribunal (UT) has held that the supply of temporary accommodation at a school constituted an exempt letting of immovable property.


Part of a secondary school had been condemned and temporary accommodation was needed until more suitable permanent arrangements could be made. A substantial temporary school building, two storeys high and with three interlinked blocks, was supplied by the taxpayer. The supply lasted for 32 months.

The temporary building comprised 66 (seven-tonne) modular prefabricated units that were clipped or clamped together to create a structurally integrated building. The taxpayer created the necessary foundations, including cutting trenches into the ground, laying fresh stone and levelling beams. When the letting came to an end, it took 98 days to dismantle the building and remove it from the site.

The taxpayer charged VAT on its supplies to the school of the temporary accommodation. The school argued that VAT should not have been charged and raised the matter with HMRC. HMRC agreed with the school that the hire was exempt from VAT and issued a decision accordingly. The taxpayer appealed to the FTT.

The issue to be determined was whether the taxpayer’s supply of temporary accommodation was exempt as a letting of immovable property (Article 135(l) of the Principal VAT Directive (2006/112/EC) (the Directive). If it was not immovable property, VAT at the standard rate would be chargeable.

The FTT agreed with the taxpayer and held that the modular units, in spite of their scale, could easily be disconnected, dismantled and moved quickly, and could not therefore be treated as a letting of immovable property.

HMRC appealed to the UT.

UT decision

The UT allowed HMRC’s appeal.

The UT noted that a building will be immoveable property if it is fixed to or in the ground. However, the ECJ has not provided an exhaustive list of the circumstances in which a building should be treated as fixed to or in the ground.

The UT also noted that the question of movability/immovability is to be determined by looking objectively at the characteristics of the building and its relationship with its site. Relevant factors include the manner in which the building relates to, or is integrated with, the ground and how easily (or not) it may be moved or dismantled and moved.

In the view of the UT, the FTT had taken an unduly restrictive view of what being fixed to or in the ground involved and focused on the individual components rather than the building as a whole. The FTT should have carried out a holistic examination of the entire building.

The UT concluded that the only reasonable conclusion was that the building was fixed to or in the ground. It had substantial foundations which were sunk into the ground. It was secured firmly in position on those foundations by the large compressive force which it exerted on the foundations. The building was connected to the services which ran through the ground. Importantly, the building could not be moved without being dismantled and it could not be easily dismantled.


The VAT treatment on supplies relating to land and buildings can often be an area of dispute with HMRC, and between customers and suppliers. It is clear from this decision that it is not always easy to determine what constitutes immoveable property for the purposes of Article 135(l) of the Directive.

In reaching its conclusion in this case, the UT has provided helpful guidance on the approach to be adopted when deciding whether the exemption under Article 135(l) is available.

A copy of the decision is available to view here.