In Duncan Lichfield v HMRC [2017] TC06040, the First-Tier Tribunal (FTT) clarified that where a planning condition contains a specific ‘occupation’ condition, this is synonymous with a prohibition on use restriction as envisaged by legislation.
- If planning permission imposes a restriction on the separate use and disposal of a property, that property cannot meet the definition of a ‘dwelling’.
- This planning restriction can cause a loss of zero-rating, or the refusal of VAT recovery.
In this case, the planning condition stated that the “occupation of the dwelling shall be limited to a person solely or mainly working at the property currently known as St Audries Garage”.
- The taxpayer applied to recover VAT under the DIY housebuilder’s scheme.
- The scheme requires the property to be designed as a dwelling.
- The taxpayer’s view was that the planning condition contained no prohibition on ‘use’: the condition relates only to ‘occupation’.
The FTT did not appear to struggle to reach a verdict:
- Where there is a restriction that applies to business generally or to a broad geographical location, then that would not prohibit separate use.
- Where the occupation is linked to a specific location, as in this case, then a prohibition on occupation is also a prohibition on separate use.
- The reasons why the planning conditions were originally imposed are irrelevant. They were in place and this meant there was prohibited separate use.
The appeal was dismissed, and the taxpayer was unable to recover VAT under the DIY housebuilders scheme.
Links
External link: Duncan Lichfield v HMRC [2017] TC06040
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