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Mixed outcome in VAT property cases

23rd Jan 2015
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The upper tribunal has ruled on two recent VAT property cases.

In a recent tribunal, Colaingrove Limited v HMRC [2015] UKUT 0002, the upper tribunal part allowed an appeal as it found that supplies of verandas together with static caravans were zero-rated for VAT.

Colaingrove sold static caravans as holiday homes on parks, some of which were sold with a veranda.

The Revenue originally rejected Colaingrove’s voluntary disclosures of overpaid VAT from March 1989 to June 2004 and December 2004 to June 2008. HMRC said the sale of caravans consisted of two separate supplies - one of a zero-rated caravan and the other of a standard-rated veranda.

In 2013 the first tier tribunal (FTT) considered whether national legislation provided for separate VAT rates regardless of whether there was a single supply. It concluded that - in very limited circumstances - a composite supply can be liable to VAT at two separate rates.

The UT decision overturned the FTT ruling supporting the Revenue’s view that verandas attached to caravans were not zero-rated.

In the UT case appeal, Colaingrove argued that the sale of a caravan and its contents was a single indivisible supply which should thus be subject to a single rate of VAT - the appropriate rate being the zero rate.

The UT used the generally accepted principles set out in the Card Protection Plan (CPP) that at the point of sale a caravan with a veranda would be a single supply.

The tribunal held that the CPP principles generally applied in determining the nature of a supply - i.e. whether a composite transaction is a single supply or multiple supplies.

In the UT case the honourable Justice Warren and judge Roger Berner allowed the appeal.

VAT expert Les Howard told AccountingWEB that the Colaingrove case was one of a series of similar cases that have been running for a few years, but he suspected the application of the ruling would be narrow.

Despite this 112,000 of the UK’s one million caravans are used as homes on caravan parks and stand to benefit from the ruling.

In another VAT case from the end of last year, HMRC v Anthony Barkas [2014] UKUT 0558, the UT found that an occupancy restriction did not prevent the application of a DIY residential conversion scheme.

Barkas had appealed against the Revenue’s decision to refuse his claim under the ‘DIY builders scheme’ in relation to the conversion of two commercial buildings on the same site into a live/work unit consisting of residential building and workshop office building.

The appeal was dismissed on the grounds that neither in the use of the term “live/work unit” nor in any other part of the application did the applicant seek a permission which prohibited the separate use or disposal of the left hand building; and that the terms of the application do not indicate that the letter of permission should be construed as if it contained that restriction.

The tribunal considered whether there was anything in the planning permission letter itself that prohibited the separate use or disposal of the building after it had been converted into a dwelling. The terms of the permission did not prohibit the use or disposal of the dwelling separately from the workshop.

Accordingly, judges Greg Sinfield and Charles Hellier said the FTT had come to the correct conclusion and dismissed the appeal.


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