The case of Roman Catholic Diocese of Westminster v HMRC (TC06692) related to a new church hall built at St Joseph Church in Stevenage, linked to an existing church building. The issue in dispute was whether the new hall was:
a)an ‘annexe’, ie an independent building capable of functioning in its own right, separate to the existing church (VAT Notice 708, para 3.2.6);
b) or an enlargement or extension to the existing church.
The Diocese (a charity) had assumed that a) applied and it was correct to issue a VAT certificate to the builder to confirm that this was the case. HMRC believed that b) applied, in which case the builder’s services would be standard rated.
After much deliberation, the tribunal allowed the appeal and looked at the before and after of the building post completion of the works, and concluded that structures were different. Therefore qualifying as an annexe.
Tips for these kinds of disputes:
1. Always focus on the approach of the judge, who I felt really cut through the finer detail and looked at the bigger picture. He said he examined “the physical characters of the building as it was, and as it is after completion of the works.”
2. Ensure that the new building will function independently from existing buildings. The new church hall even had separate heating thermostats and boiler controls.
3. Don’t be afraid to ask for a ruling from HMRC – the charity unit is much more accommodating in giving written VAT rulings than for a commercial business. There is an online form headed: “Charities and VAT – Enquiry form for Charities” which can be completed and submitted and then you get an email reply with a decision.