In St Brendan’s Sixth Form College v HMRC [2018] TC06384, the First-Tier Tribunal (FTT) agreed with the taxpayer that a new block at the college was independent of the existing buildings and the construction costs were zero-rated.

The college constructed a new block (building D) which included additional teaching space, a café, staff room, socialising space and replaced temporary classrooms:

  • It had a ground floor and first floor.
  • Toilets were on both floors (including disabled).
  • There was an IT room.
  • It had its own utilities (gas, water, heating, electrics, and power distribution system).
  • It was built 7m away from existing buildings.

HMRC disputed that the Construction works could be zero-rated:

  • There was a covered bridge which connected the first floor of new building D to existing building C.
  • The buildings were connected so that they could act as one single entity.
  • The activities were the same, or similar, to what was carried on in the other buildings.
  • The only way for a wheelchair user to get to the first floor of the new building was to enter building B, take the lift and then cross the link-bridge between B and C and then the link bridge between C and new building D.

Both the college and HMRC agreed that the property was not an enlargement or extension of an existing building. The two key points for the FTT were therefore:

  • Whether the building was an annexe or separate building. If separate, it could be zero rated.
  • If it is an annexe, it must meet all of the following:
    • Be used solely for a relevant charitable purpose.
    • Capable of functioning independently of the existing buildings.
    • The access between the two buildings connected takes place mainly via the buildings own separate entrances, not via the connection.

The FTT decided that the building was not an annexe:

  • An annexe is a building, usually, but not necessarily, physically connected to an existing building and which performs specific subsidiary functions to the main building.
  • When looked at in the round, given the new builds separate utilities, entrances etc., the connecting bridge on its own is not sufficient to mean the new building is not separate.
  • The new building is separate, and zero rating applied.

For completeness, the FTT also made a decision on the basis that the new building was an annexe:

  • There was no challenge to the use of the property, i.e. it was considered to be solely for a relevant charitable purpose.
  • The FTT believe that HMRC accepted the evidence that the new buildings ground floor entrance was the main entrance.
  • Similarly, the main entrance of the existing building was its own main entrance.
  • The challenge was over the condition requiring the building to function independently.
  • HMRC’s view was that:
    • It could not because of the lack of access to the first floor for wheelchair users other than via the bridge.
    • In absence of the bridge the building does not fulfil requirements of Disability Discrimination legislation, so it cannot function independently.
  • The FTT disagreed:
    • Saying the building cannot function independently because a limited number of students cannot access the first floor seems to take this requirement beyond a sensible approach.
    • Lack of access for small number of students cannot disqualify the buildings from being able to function independently.
    • The legislation referred to by HMRC was repealed and incorporated into the Equality Act 2010.
      • This Act does not impose conditions on the building: It imposes obligations on the college.
      • The college arranges classes when they are made aware of a student who uses a wheelchair such that they only need to access the ground floor.
    • Based on this, the inability for wheelchair users to access the new first floor without the bridge does not disqualify it from functioning independently.
  • Even if the building was considered an annexe, the FTT concluded that it would still be zero-rated.

The college’s appeal was allowed.


VAT: Land & Property (notes)

VAT: Land & Property at a glance

External link:  St Brendan’s Sixth Form College v HMRC [2018] TC06384


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