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VAT Memo 2007-2008 Newsletter Issue 1

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Particular activities  

 

Land and property

Annexes

See VM ¶5182

HMRC have amended their published guidance on the definition and scope of an annexe.
An annexe should provide extra space for activities which are distinct but associated with those carried out in the existing building. These activities should be carried out without reliance on the existing building (although building services such as utilities and water can be shared). So each would form two separate parts of a whole building but operate independently of each other. Examples would include a:

- day centre added to an existing residential hospice;

- church hall added to an existing church; and

- nursery added to a school building.

 

Notice 708 para 3 (revised)

 

Building materials for churches

See VM ¶5212

HMRC have amended their published guidance so that the following are no longer treated as building materials in relation to churches:

- amplification equipment;

- humidifying plant; and

- fixed pews.

 

Notice 708 para 13 (revised)

 

Tax certificates for intended use

See VM ¶5224

HMRC have stated that when a customer provides a certificate of intended zero-rated use, he must either be:

- occupying the building and carrying out an activity there; or

- leasing it out on commercial terms.

 

Notice 708 para 16 (revised)

 

Charities and change of use

See VM ¶5300

HMRC have stated that the removal of the self-supply charge which occurred on 21 March 2007 may also affect the position of any charity that obtained zero-rating due to original charitable use, not just where minor business use was anticipated.
Charities should contact HMRC for further advice.

HMRC Brief 29/07

 

DIY housebuilders

See VM ¶5316

In a recent case, it was held that an intention to sell whilst letting a self-built property for the short term did not amount to a business for the purposes of the DIY scheme. In particular, while an intention to sell the property suggested that a business would be carried on, the failure to actually make a sale and a current intention not to sell meant that no such business would ever commence. So the claim for a refund of input tax was successful.

Memo points The details of the case were as follows:
The taxpayer purchased a property with planning permission to construct another property in the grounds, and intended to sell the new building immediately. A delay then ensued due to a planning permission issue which meant that the taxpayer could not be sure where the boundary for the new property would lie. So he granted a lease in the meantime. He subsequently changed his original intention, deciding to occupy the new property and sell the original one.

Michael Patrick Curry [2007] (VTD 20077)

 

Refurbishment of empty premises

See VM ¶5430

The reduced rate of VAT currently applies to the renovation of residential buildings which have been empty for at least 3 years prior to the construction work commencing.

From 1 January 2008, the period of non-occupation is reduced to just 2 years.

 

Pre-Budget Report

 

Making an option to tax

See VM ¶5686

From 17 September 2007, if HMRC refuse permission to opt to tax a property, the trader has a right of appeal against the refusal.

SI 2007/2351

 

TOMS and valuation of inhouse supplies

See VM ¶7540

A coach firm valued its zero-rated inhouse supplies at market value, based on the fares charged by a major national competitor. The company argued that this reflected the true profit gained from these supplies, although the result was to achieve a much reduced VAT liability under the TOMS calculation.
It was held that this method was not valid, because it was too divorced from reality i.e. a local coach firm cannot be compared to a national company.

Welsh's Coaches Ltd [2007] (VTD 20193)

 

 

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