I believe there has been a lot of unfair treatment applied to charitable buildings over the years. The VAT law sets out to zero-rate such projects including buildings similar to village halls. But here is the tricky part – ‘What is a zero-rated village hall?’
HMRC have always argued this does not include a sport related building or one that involves employing staff. On a penalty related matter Greenisland Football Club has been through the Upper Tier Tribunal and come out smiling but might easily have had an easier road. Having had professional advice supporting it in issuing a qualifying use certificate (and thereby securing zero rating on the construction), it shouldn’t have had a problem. However, in order to resist a penalty it was faced with having to prove it had acted reasonably in claiming zero-rating on the construction but couldn’t provide a copy of the advice it received.
In the decision we read that –
“Mr Munn had told the FTT that he had relied upon HMRC’s guidance set out at VAT Notice708. He had also checked the position with his professional advisers and they had confirmed his original view. HMRC complained that a reasonable tax payer could be expected to check the position with HMRC by way of a non-statutory clearance before issuing a zero rated certificate.
“But in the application for leave the skeleton argument on behalf of HMRC states: “The Respondent would expect a reasonable conscientious tax payer, undertaking a one-off high value project such as this to construe the legislation, to seek professional advice and/or request advice from HMRC not merely rely on guidance.” (Emphasis added)
“But the FTT has found that that is exactly what Mr Munn on behalf of GFC did. He did seek professional guidance. He followed the professional advice he was given. So HMRC has now changed its case to try and argue that GFC in any eventshould have sought advice from HMRC if GFC is to be entitled to rely on this defence. It is also noteworthy there is no mention on HMRC’sVAT Notice 708 that advisesa tax payer to seek advice direct from HMRC.”
The question of what is a zero-rated village hall? will never be an easy one to answer. The lesson here is to tread carefully when dealing with land and property; ask the right questions and keep hold of all advice received.
If you’re not sure, please call. Remember sooner is always better.