Upper Tribunal Judgment

1. Upper Tribunal
HMRC v Astral Construction Ltd
[2015] UKUT 0021 (TCC)
The Upper Tribunal has released its judgment in the above case. This was an appeal by HMRC
against the decision of the First-tier Tribunal (FTT). The issue to be determined was whether
the construction of a nursing home on the site of and incorporating a redundant church was the
construction of a building intended for use for a relevant residential purpose (and thus zero-
rated) or, as contended by HMRC, the works were the enlargement of, or extension to the
existing church.
The taxpayer supplied construction services to the operator of a nursing home. The
development incorporated an existing but redundant church. The work involved the
construction of two substantial new wings with the church being used as the main entrance and
reception. The FTT concluded that when compared to what previously existed, the new
building dwarfed the old church and that, looking objectively at the physical characteristics of
the building(s) before and after the works had been completed, the only conclusion that could
be drawn was that the works were correctly to be classed as the construction of a new building
rather than the extension or enlargement of the old church. HMRC appealed.
The Upper Tribunal could only allow HMRC's appeal if the FTT had made an error of law or
made a finding of fact which was not supported by the evidence. HMRC's primary argument
was that the FTT had applied the wrong test but, the Upper Tribunal concluded that it had not.
The phrase "construction of a building" contained in the VAT law is wide enough to include
the construction of a new building or buildings connected to and incorporating the old church.
In addition, whether the works were an enlargement or an extension to the old church is a
question of fact, degree and impression. The structure which existed after the works was a
single fully functional nursing home. As a matter of impression, size, shape, function and
character, it was vastly different from the existing church that it could not be said to constitute
either the conversion, enlargement of or extension to the church. These findings of fact by the
FTT were, therefore, wholly reasonable. Accordingly, HMRC's appeal was dismissed.
Comment – This is a useful judgment for developers of sites where existing buildings are wholly
or partly incorporated into the works. In most cases, the works will be of a fairly minimal scale
and will be regarded as extensions or enlargements to the existing buildings or structure.
However, as this case demonstrates, where the scale of the works are such that the existing
building is only a very small part of the overall larger project, it may be possible to argue that
what has been created is a new building and not an extension or enlargement of the old
building. This may be useful in cases where houses and other relevant residential or relevant
charitable buildings are to be or have been constructed incorporating the whole or part of an
existing building.
For further information in
relation to any of the
issues highlighted in this
Case Alert please
contact:
Stuart Brodie
stuart.brodie@uk.gt.com
Karen Robb
karen.robb@uk.gt.com
Richard Gilroy
richard.gilroy@uk.gt.com
Andrea Sofield
andrea.sofield@uk.gt.com
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