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

VAT zero-rating and property, when a wall is a facade for DIY housebuilders

  • LinkedIn (opens new window)
  • Twitter (opens new window)
Philip McNeil By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)

1 December 2020

Main points:

  • VAT and property is a maze of subtle distinctions
  • Large sums hinge on the meaning of single words
  • No assumptions, tax advice

Property. It’s not a façade.

Anyone thinking of re-building their home to enable better access for Santa Claus would do well to look at a recent case on the VAT DIY Housebuilders’ Scheme.

If you want to zero-rate, rather than replacing just the chimney, you may need to demolish the entire house and rebuild. Except for the façade of course.

Busy builders

It has been a busy few years for DIY homebuilders at Tribunal, with a succession of cases all turning on slightly different facts. Results have been mixed, with notable wins and losses.

A quirk of Scottish planning rules saved the day for Simon and Joanne Cotton (Simon and Joanne Cotton TC07553 [2020] UKFTT 0057(TC)) (see Tax and location - when it pays to be Scottish).

But John Watson (John Watson and Another TC07513 [2020] UKFTT 5 (TC)) fell at the last fence with a creative new build.
His edifice was achieved by the ingenious and novel route of creating brick walls around a mobile home and then removing the mobile home. But the claim failed at the last, due to not having legitimate planning permission at the right time.

What a façade

But the star award must surely go to Joe Smithers (Joe Smithers TC07858 [2020] UKFTT 0380 (TC)). Everyone knows that VAT cases can be won or lost on the narrowest of distinctions. But here, the case failed and just under £20,000 of potentially reclaimable VAT was lost, over the meaning of the word ‘façade’.

While some might, in confusion after a late night out – lockdown permitting - have a vague recollection from school days that the word is connected with Christmas pantomime (or should that be farcical) others will rightly agree that it has something to do with buildings.

The real VAT experts among us will at once recall VATA 1994 schedule 8 Group 5 para 18, which says:

(18) A building only ceases to be an existing building when:
(a) demolished completely to ground level; or
(b) the part remaining above ground level consists of no more than a single facade or where a corner site, a double facade, the retention of which is a condition or requirement of statutory planning consent or similar permission.

To be or not to be

With a fate better determined than that of Schrödinger’s cat, a building only ceases to exist when all that remains is a façade. Any why does this matter? Because the DIY VAT refund applies to new builds only, not modifications (per para 16, Group 5). And if anything of the original remains, it’s a standard rated modification not a zero-rated new build

Turning to Mr Smithers’ case, he accepted that there had been an existing building, but claimed that all but a double façade had been demolished. Hence the VAT reclaim was valid. Ah, but doesn’t a double façade require a corner site? Anyway, what is a façade?

Double façade

Mr Smithers’ view was that a façade was ‘simply an outside wall’. There were only two walls left, so that was a double façade, right?
But the literati of the Tribunal disagreed. Parliament could have said ‘outside wall’ if it meant outside wall, but it didn’t. It meant façade …

‘Instead, they {parliament} used “façade” which is defined by one dictionary as “the principal front of a building, that faces on to a street or open space” and by another as “the front of a building, especially a large or attractive building”.’
Or why use a fancy word if the plain one will do?

But there was more to follow. The property is an end-terrace on the inside curve of the street. The gap between adjacent properties is narrower at the front than at the rear of the properties. Could this be a ‘corner site’ with a double façade? Would this save the day?

But no. The Tribunal remained unconvinced. Just as a façade is a façade, so too a corner site is, well, a corner site. It was the site which needed to be ‘cornered’ not the building.

While not mandating a junction of public roads, as HMRC opined, to be requisite for a corner site, it did require more than the property having corners – a view which Mr Smithers thought sufficient. After all, is not a corner terrace of necessity on a corner site? It appears not. It is the site, rather than the building, which the legislation has in view.

And a gap between properties is insufficient to create a corner site.

Conclusion

On reflection, perhaps the best idea would be to ask a tax adviser before embarking on that new chimney for Santa.

Tax and location - when it pays to be Scottish

By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)

27 February 2020

2022-11-mitigo 2022-11-mitigo
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: