Following on from our last blog post the outcome of HMRC’s appeal to the Upper Tribunal in JS Building Solutions (J3BS) was published in June 2017. The decision has not been subject to any further appeal.

As outlined in the blog post below, J3BS carried out a building project that resulted in an enlarged dwelling incorporating three walls of the existing dwelling on the site. The First-tier Tribunal held that this was the construction of a new dwelling and zero rating could be applied to the works. The First-tier tribunal did not see the works as amounting to the alteration of an existing building preferring to characterise the works as the construction of a new building.

The Upper Tribunal rejected the approach of the First-tier stating that in almost all cases a project that does not satisfy the façade retention rule will be seen as an existing building and works will not be able to be described in VAT terms as the construction of a new building. The façade retention rule allows a single façade or double façade on a corner site where it is retained as a condition or requirement of statutory planning consent or similar permission to be ignored for the purposes of determining whether a project can be a zero rated new build dwelling.

If as was the case here more of the pre-existing building is retained than the requisite single or double façade then the works to those retained parts would be an alteration of an existing building and excluded from the zero rating provisions.

The Upper Tribunal decision distinguished itself from the earlier Astral decision which allowed the zero rating of a large extension to an existing church to form a care home.