Value Added Tax

Construction ― enlargements, extensions and annexes to existing buildings

Produced by Tolley
  • 22 Dec 2021 18:43

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Construction ― enlargements, extensions and annexes to existing buildings
  • What is an existing building?
  • What is meant by enlargement, extension or annexe?
  • What is the difference between an annexe and an extension / enlargement?
  • What does this practically mean for zero-rating works on existing buildings?
  • When can the construction of an enlargement or extension be zero-rated?
  • When can the construction of a charitable annexe be zero-rated?
  • What does ‘solely’ for a relevant charitable purpose mean?
  • When can an annexe ‘function independently’?
  • What does ‘access conditions’ mean?
  • More...

Construction ― enlargements, extensions and annexes to existing buildings

This guidance note examines the exclusion from the zero-rating for construction services that applies to the following kinds of works performed on existing buildings:

  1. enlargements (unless they create additional dwelling(s))

  2. extensions (unless they create additional dwelling(s))

  3. constructing annexes (except certain charitable annexes)

VATA 1994, Sch 8, Group 5, Notes 16(b), (c), 17

This should be read alongside the Construction ― zero-rating of construction services guidance note which sets out the scope of zero-rating for construction services.

In-depth commentary on enlargements, extensions and annexes can be found in De Voil Indirect Tax Service V4.232I (enlargements and extensions) and De Voil Indirect Tax Service V4.232J (annexes).

As these kinds of construction services are excluded from zero-rating, they will generally be standard-rated, although some works may qualify for reduced-rating. For reduced-rated construction services, see the Conversion ― reduced-rating conversions to different residential use and Renovations and alterations ― reduced-rating works on empty homes guidance notes.

What is an existing building?

The meaning of an ‘existing building’ in this context is as described in the Construction ― conversion, reconstruction and alteration of existing buildings guidance note.

What is meant by enlargement, extension or annexe?

There are no legislative definitions of the terms enlargement, extension or annexe, and this can cause practical difficulties for determining the VAT treatment of construction services. Often it is not necessary to distinguish between the three terms because most enlargements, annexes and extensions will be excluded from zero-rating anyway. However, one common area of dispute concerns charitable annexes and

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