The tax regime is playing a central role in the government’s drive to create more new homes. In a case which proved the point, a tribunal favoured a broad interpretation of VAT legislation and found that a house in multiple occupancy can properly be viewed as a zero-rated dwelling.
A developer purchased a commercial building and converted it into a residential property with 10 bedrooms. Each occupant had his or her own room key, but they shared utility bills and a communal kitchen. Two of the rooms were en suite, but occupants of the others had two bathrooms between them.
The developer sought a £45,000 VAT rebate on the purchase price on the basis that the property had been transformed into a dwelling that consisted of self-contained living accommodation. HM Revenue and Customs (HMRC), however, disputed the claim, arguing that, because of its multiple occupancy, the property could not be a dwelling within the meaning of schedule 8 of the VAT Act 1994 (the Act).
Upholding the developer’s appeal, however, the First-tier Tribunal (FTT) noted that the objective of the Act was to zero-rate the creation of new homes where none had existed previously. Interpreting the Act in line with that purpose, the FTT found that a property in multiple occupancy can be a dwelling within the zero-rating provisions.
Capital Focus Limited v The Commissioners for Her Majesty’s Revenue and Customs. Case Number: TC05193