ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Does building work qualify as the zero-rated construction of an annexe intended for use solely for a relevant charitable purpose?

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Jan Garioch CA

5 November 2019

Main points

  • HMRC wanted to refuse zero rating to Immanuel Church on the grounds that building work did not qualify as an annexe.
  • The HMRC case was flawed as changes to the original plans were ignored.
  • The Tribunal focused on distinguishing an annexe from an extension/enlargement.

Jan Garioch CA discusses a recent case, Immanuel Church v HMRC, which saw the First Tier Tribunal bring clarity to a common dispute.

The First-Tier Tribunal was served up a familiar question by Immanuel Church in Bournemouth on whether its construction costs for a new extension/annexe qualified for zero rating. As is typical in such cases, the Tribunal was presented with a lengthy history of the project from its origins 15 years previously. At points within that period, the plans were more elaborate than what was finally constructed. Since the costs outstripped the Church’s budget a process of ‘Value Engineering’ commenced. That elegant term covered a cost cutting exercise where changes were made to the original plans to bring the project within the available budget.

Changes to the plans

The Tribunal learned a number of elegant architectural terms in the course of their deliberations. For example, a clerestory is a high section of wall with windows above eye level to admit light which would create impact in any project. Lovely as it sounds, it creates complexity and cost and so was deleted in favour of a humble flat roof. Another casualty of cost cutting was a ramp construction which would have seen wheelchair access exclusively through the new building. That was axed and the existing access to the Church was unaltered. It became clear to the Tribunal that HMRC’s Statement of Case referred to aspects of the plans which were superseded.

The point at issue

HMRC were obliged to recognise the significance of these changes and accepted the new annexe/extension is capable for functioning independently from the existing building and that there are separate main entrances for both. Since HMRC also accepted that the new extension/annexe is intended for use solely for relevant charitable purposes, the Tribunal concluded the only point at issue was whether the new building is an annexe which can qualify for zero rating or merely an extension which cannot.

Factors to consider

Bryan Thomas Macnamara v HMRC (VTD 16039) differentiated building terms on a scale from ‘most integrated’ to ‘least integrated’ to an existing building. Alterations, reconstructions and conversions fall at the most integrated end of the scale. Enlargements and extensions have a lesser degree of integration. An annexe is not integrated with the existing building or of tenuous integration. Cantrell v Customs & Excise Commissioners (STC 486) pins down when the comparison must be made between the building as it was and as it will be after the works are completed. It must be done at the time of supply.

Therefore, what matters is the building as it is eventually built and not as originally planned.  Equally, the actual use to which the building is subsequently put is of relatively limited importance. What is important is the use for which it is physically capable to be put. Finally, in St Brendan’s Sixth Form College v HMRC (UKFTT 128) a new building was connected to an existing building by means of a covered bridge at first floor level. It was held this was not sufficient to render the new building part of the existing building.

The decision

Applying these principles, the Tribunal concluded that the new building, which is in modern glass and aluminium design in contrast to the existing brick building, is not an extension because it lacks the ability to be used for any common activities. The only connection with the Church is via a set of fire escape doors which open only from the Church. It is simply too separate from the old church hall to be used for a common activity. Consequently, it is an annexe which HMRC acknowledge its intended use is for relevant charitable purposes and thus it qualifies for zero rating.

Is the zero rating for the issue of a bank note restricted to newly printed banknotes?

By Jan Garioch CA

12 July 2019

VAT: Entitlement to deduct

By Jan Garioch, CA

26 April 2019

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: