When is a dwelling not a dwelling?

The taxpayer in this case, Burton, purchased a plot a land which included a lake. This lake was dredged, stocked and reopened for use by anglers on a permit basis. Several years after the re-opening of the lake, the Appellant applied for planning permission for the construction of a ‘new occupational dwelling with disabled accessible w/c facilities’ on the site.   The planning permission granted stated that ‘the occupation of the dwelling shall be limited to a person solely or mainly employed in Park Hall Lake Fishery’.

On construction of the building, a claim for the refund of input VAT incurred was submitted on the grounds that it related to the construction of a new building designed as a dwelling. This claim, however, was rejected due to their belief that the accommodation did not qualify as a dwelling for VAT purposes.  This decision was made on the basis that to qualify as a new dwelling for VAT purposes several conditions need to be met, including the following:

“2(c) the separate use or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision…”

The First-tier tribunal allowed the taxpayers appeal on finding that the building constructed satisfied the above criteria. HMRC then appealed to the Upper Tribunal where the application of 2(c) was once again considered. It was determined that as the accommodation could only be occupied by employees of the business it could not be “used separately” from the business with the result that the building was not ‘designed as a dwelling’ for VAT purposes (despite the fact that it was clearly lived in by the occupants as their home).

When it comes to land and property, the high values involved mean that any VAT issues involved should be considered prior to the completion of the proposed transaction. Make use of our free VAT helpline and discuss any issues you may have with one of our experienced consultants today.

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