Commercial property – Inland Revenue update –

The Inland Revenue has changed it’s view that VAT treatment of buildings formed from more than one dwelling

Following the case of  Catchpole v HMRC [2012] UKFTT 309 (TC) and Fox v HMRC [2012], the Inland Revenue now accepts that more than one building can comprise a single dwelling, provided that the buildings are designed to function together as a single dwelling.

In order to benefit from zero-rating, the buildings must be constructed or converted under a single project. If more than one building that will comprise a single dwelling is constructed in stages, the subsequent stages will be treated as annexes to the original building and will not benefit from zero-rating unless they are on the same site, the stages are completed with no unreasonable delay and none of the buildings are occupied until all the stages are complete.

Taxpayers who have constructed or converted more than one building into a single dwelling may submit a claim for overpaid VAT within four years of publication of the brief. However, the Inland Revenue may refuse claims if the taxpayer will be unjustly enriched.