Construction of a building intended for use solely for a relevant residential purpose or a relevant charitable purpose is zero-rated for VAT purposes.In the case of Capernwray Missionary Fellowship of Torchbearers v HMRC, the taxpayer was a charity that constructed a Conference Hall on their premises. The intended use of this Conference Hall was to host bible study courses on behalf of the charity, amongst other courses. Capernwray charges students for these courses but not with the aim of making a profit.Capernwray claimed that the construction of the hall should qualify for the zero-rate under Group 5 of Schedule 8 VATA 1994 as the hall would stage courses provided by themselves, from which they not benefit financially and so this supply was not “in the course or furtherance of businessâ€. This would allow the construction of the Conference Hall to qualify for the zero-rate of VAT under use for a residential charitable purpose.However, The Upper Tribunal ruled that as the remunerations received for the courses were linked to their duration, showing a direct link between services and payment, the receipt of money qualified as consideration for a supply despite the fact that the money received was not substantial enough for Capernwray to earn a significant profit. Under the terms of Group 5 Schedule 8, this supply was not linked to relevant charitable purpose and thus was part of a taxable person's economic activity. Therefore the construction of the Conference Hall itself could not be zero-rated.The VAT liability of the various supplies of land and property can be a complex issue and it is always wise to seek advice on matters of this nature so call our free helpline for expert advice.

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