In Roman Catholic Diocese of Westminster v HMRC [2018] TC06692, the First-Tier Tribunal (FTT) concluded that a new hall built at a church was an annexe that could function independently and the costs could be zero-rated.

• The Diocese is the freeholder of a church built in the 1950s.
• In the 1970s it was divided internally to provide space for a hall and separate space for worship.
• Following a decision to amalgamate a number of local churches the church was remodelled in 2016:
  • An upper storey was added.
  • The hall was changed back to a worship space.
  • The original main entrance was reinstated.
  • A new hall was constructed t the side of the church which consisted of a meeting room, kitchen, and toilets.
• The appeal was solely on whether the works on the hall could be zero-rated:
  • If the hall is an annexe capable of functioning independently it will be zero-rated.
  • If it is an extension, alteration, or enlargement of the existing building, as HMRC contend, the Construction costs cannot be zero-rated.

The FTT allowed the Diocese’s appeal:

• The whole point of the works was to accommodate more worshipers in the main building and to add a supplementary structure to enable the non-devotional activities to continue.
• The hall is an adjunct and supplementary structure to the existing building and is therefore an annexe.
• The hall is capable of functioning independently:
  • It has its own:
    • External entrance.
    • Toilets.
    • Refreshments facility.
  • Those accessing the hall for social functions do not need to access the church building.
  • The internal double doors between the church and the hall are usually closed.
  • The hall had a separate boiler and separate controls for the heating.

As the hall is an annexe which is capable of functioning independently the costs can be zero-rated.

Links

Land & Property VAT at a glance

Land & Property VAT (notes)

External link Roman Catholic Diocese of Westminster v HMRC [2018] TC06692

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