Listed building's internal features prevent zero-rating

In Richmond Hill Developments (Jersey) Limited v HMRC [2021] TC08232, the First Tier Tribunal (FTT) held that the substantial reconstruction of a listed building was not sufficient enough to meet the criteria for zero-rating and recovery of the related input tax.

• Richmond Hill Developments (Jersey) Limited (Richmond Hill), bought a disused nursing facility.
• They converted the building into a series of flats with a communal swimming pool, gym and communal sitting and dining areas.
• As a result of the two and a half years of reconstruction, only the exterior walls, roof, internal chapel, internal marble walls and staircase, internal structural support items and certain features of the King's Room and Queen's Room remained. These were all retained to comply with the planning permission.
• Sch 9 VAT Act 1994 (VATA 94) states that transfers of flats will be exempt from VAT unless Zero-rated.
• Sch 8 Group 6 Item 1 zero-rates the supply of Dwellings that are the result of a 'substantial conversion' of a listed building.
• The caveat in Group 6 Item 1 is that zero-rating will not apply if anything more of the original building is left other than the external walls and any other external features of architectural or historical interest.
• Richmond Hill argued that the internal features retained were required for structural integrity and were of a de-minimis nature requiring them to be ignored for the purposes of the restriction.

The FTT found that:

• Group 6 Item 1 was an exception to the general rule in Group 5 that to gain zero-rating a building would need to be demolished to the ground and rebuilt as a new building.
• Structural items inside the property could be ignored if part of the external walls and/or de-minimis.
• Some of the features retained were to maintain the characteristics of the listed building, such as the marble walls and staircase and could not be viewed as de-minimis.
• The internal items remaining could not in their totality be considered de-minimis.

 Group 6 Item 1 did not apply and the Appeal was dismissed.

Useful guides on this topic

Land & Property VAT
An outline of the VAT treatment of some of the more common supplies of land and property.

Land & Property: Dwellings 
What is a dwelling for VAT purposes? What is the VAT treatment for construction, conversion, sale, and letting of a dwelling?

Land & Property: Non-residential
This guide considers the VAT treatment of the supply of non-residential property.

External link

Richmond Hill Developments (Jersey) Limited v HMRC [2021] TC08232