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.


Land & Property VAT at a glance

Land & Property VAT (notes)

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