HMRC accepts plans-based façade condition for zero-rating

Where planning consent requires building works to be carried out in accordance with plans, and those plans show that a façade is to be retained, the retention of that façade counts as an explicit condition or requirement of the consentGOV. HMRC now accepts that conclusionGOV, stated in Boxmoor Construction Limited [2016] UKUT 0091GOV, so the retention meets Note 2(c) of Group 5 of Schedule 8 to the VAT Act 1994GOV and the works can be treated as the construction of a building for zero-ratingGOV. In Boxmoor itself the appeal failed on its facts; the proposition HMRC has adopted is the general principle about plans-based conditions.

The starting rule is unchanged. A replacement building is treated as the construction of a building only where the previous building has been demolished completely to ground levelGOV; otherwise the works are an alteration or enlargement of the existing buildingGOV. The single exception HMRC recognises is the retention of no more than a single façade, or a double façade on a corner site, where that retention is a condition or requirement of statutory planning consent or similar permissionLegislation. A façade is the front or street-facing wall, though another exterior wall counts where it must be retained for the same reason.

In practice the concession removes the need for a separately worded façade-retention condition where the paper trail does the same job: a consent condition tying the works to the plans, plus plans that clearly identify the façade to be keptGOV. Where the consent is unclear, other documentation can still serve, such as correspondence identifying the façade and showing its retention is at the insistence of the planning authorities rather than the developer's choice. HMRC continues to reject purely implicit conditions — retention kept for the owner's own expediency, with planners unconcerned, does not satisfy the testGOV, whose purpose is to excuse full demolition only for a planning reason such as preserving the street scene.

Specificity in the plans remains decisive. Tribunals have held that notes, annotations and construction detail showing how new walls and joists attach to the existing façade can establish the requirement, while a vague reference to existing walls, pointing only generally at a typical section without distinguishing façades, cannot. Fragments of a demolished building so minor as to be de minimis are ignored; anything more above ground level defeats the demolition testGOV.

The rules sit in Group 5 of Schedule 8 to the VAT Act 1994Legislation, with the façade exception in Note 18GOV and the condition requirement reflected in Note 2(c)GOV.