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Property Briefing Summer 2018
Articles in this edition
Dilapidations – should they be included in your financial statements or not?
Insolvency in the construction industry – practical measures
UK Property Tax
To zero or not to zero that is the question
chartered accountants & tax advisers
2
Welcome to the Summer 2018 edition of haysmacintyre’s Property Briefing.
In this edition we look at a variety of topics pertinent to property, including accounting for dilapidations and take a look back, as well as forwards, as to the landscape now facing non-resident and non-natural property owners.
I am grateful to Michael Chilton, partner at EMW Law, for his article on how to the protect yourself against the cost of an insolvent contractor. Ten years ago, RBS was a bank that was ‘too big to fail’, however, Carillion was not granted such elevated status despite undertaking a number of substantial Government contracts. Its failure is a timely reminder that size is no guarantee of success. Whilst uncertainty provides opportunities and challenges for the entrepreneurial minded, the current turmoil in Government gives uncertainty, a dampener on economic activity and increased risk of other failures. Michael’s thoughts provide straightforward ideas that might save your business money.
Although the Office of Tax Simplification was established at the start of this decade, its reach, so far at least, seems to have missed the property sector with the various increases, extensions and complications to the tax regime the sector has faced in recent years. Non-residents have seen their property interest gains and profits brought in to the UK tax net, SDLT rates increased, as well as the restriction of tax relief on interest against rental income. Our article, ‘UK Property Tax’, looks at some of these recent changes and what is still to come.
Accounting for property dilapidations has always been subject to judgement. However, with landlords looking at these as an additional source of income, we look at the factors that need to be assessed when determining an appropriate accounting approach.
Finally, VAT is notorious as a hidden tax in property which, if proper advice is not obtained and appropriate planning steps not followed, can result in an unwelcome additional cost. In our article on VAT, we look at a recent case which has provided some clarity on when a new building is a dwelling and can be zero rated for VAT purposes.
As always, the haysmacintyre property team would be happy to hear from you on any of the issues raised in this Briefing. Please feel free to contact your usual haysmacintyre adviser, me or any of the authors of the respective articles.
We look forward to hearing from you.
Ian DanielsHead of Property and Partner, haysmacintyreT 020 7969 5502 E [email protected]
Welcome
Contents 2 Dilapidations – should they be included
in your financial statements or not?
4 Insolvency in the construction industry – practical measures
8 UK property tax
12 To zero or not to zero that is the question
© 2018 haysmacintyre | Property Briefing Summer 2018 1
Dilapidations – should they be included in your financial statements or not?
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Tax benefitsThe tax treatment of dilapidation provisions can be complex but, in general, follows well established tax principles, namely, revenue expenditure is allowed when recognised in the profit and loss account, whereas capital expenditure is allowed through the capital allowance regime. However, these are general principles and professional advice should be sought on individual circumstances, ideally in advance of making the provision in order that the appropriate approach is taken. It is important to establish exactly what is being paid for as part of a dilapidations payment in order to ensure the appropriate tax treatment is applied and the tax relief maximised.
A company’s corporation tax liability may be reduced as a result of making specific and supportable provisions with the attendant improvement on the company’s cash flow. There are also likely to be deferred tax implications of making dilapidation provisions which will need considering.
CredibilityThe more sophisticated readers of a set of financial statements will recognise the possibility of dilapidations being required and omitting such provisions may undermine their overall credibility. If the directors have not provided for dilapidations it might be questioned what else has been left out and just how good is the quality of the earnings reported? The auditors, when appointed, are also likely to want credible answers to the position adopted by the directors.
DisputesUnfortunately, all too often companies do not seek professional advice on their exposure to dilapidations and/or give them little consideration until that large invoice comes through the door. At this time, panic can set in and, all too often, a draining legal dispute follows. However, by keeping a regular check on the dilapidations exposure, companies can plan accordingly, whether through a planned programme of maintenance or through positive engagement with the landlord. It is also likely that the opportunities for maximising the tax efficiency of the dilapidation costs will be greater if advance planning is undertaken. Although this costs time and money, the savings should more than pay for this.
So, what next?Seeking regular surveyors’ report will, at the very least, give visibility to the exposure to dilapidations and enable effective planning to be undertaken. Directors will then be in the right position to assess whether there really is a dilapidations provision to be accounted for and, if there is, what is the appropriate amount. The financial statements should then be a more accurate and comparable reflection of the company’s financial position, as well as giving possible tax benefits and improving cash flow.
Jake Pearlman, Manager, haysmacintyreT 020 7969 5529 E [email protected]
Pressure from tenants for shorter, more flexible, lease arrangements has resulted in landlords facing an increased risk of being left with an empty property as tenants vacate for one more suited to their needs. The risk of a void also carries exposure to the attendant rates and maintenance bills with no tenant to pay them. These have all made it more likely that landlords will purse dilapidation claims as a way of preserving their income stream.
Accounting for dilapidationsAccounting for dilapidations can be a particularly controversial area of a set in financial statements. Regularly, leases specify that dilapidation expenses will be due at the termination of the lease, however, no specific provision quantifies the amount.
Whether you are reporting under International Accounting Standards or UK Generally Acceptable Accounting Standards, the principle is the same, namely that a provision is required when:• a present obligation (legal or constructive) has arisen
as a result of a past event• payment is probable (more likely than not) and• the amount can be estimated reliably.
Signing the lease is the past event that creates a present obligation, albeit one that may not crystallise for a number of years. Companies often argue that either the payment is not probable or, as the obligation is well into the future, the obligation cannot be reliably measured in order to try to avoid including a provision in the financial statements.
Of course, this is stretching the truth. The probability of the payment is a matter of judgement where past history and current practice will be important determinants as to whether a payment is ‘probable’. However, the provision can be reliably measured by obtaining a surveyor’s report which assesses the cost of meeting the obligations under the lease by producing a quantified schedule of dilapidations. Therefore of the three criteria required it is the second one that is likely to be the one subject to most discussion and judgement.
Why should you provide for dilapidations?The fact the accounting standards say you should provide for dilapidations is not the answer most companies want to hear! Some see the exercise as needlessly increasing annual costs and reducing surpluses for the year for little, or no, benefit. Nevertheless there are other implications in making proper reserves for dilapidations.
Spreading the costA company which does not provide for dilapidations can find itself faced with a significant expense in the year in which the obligation crystallises. This might significantly reduce the accumulated reserves that the boards of directors believed that they had. Investment decisions may also have been made based on the strong(er) reserves position, resulting in misinformed decisions due to a significant missing provision. Recognising a cost annually gives a more accurate position of the financial position of the company and matches the cost of the ultimate dilapidation with the period over which the company has benefited from the asset. It should also lead to financial statements being comparable year on year as the ‘one-off’ hits to profit are avoided.
Dilapidations are costs that are traditionally incurred upon the termination of a lease whereby a tenant is obligated to pay for certain repairs, or rectifications, to the property to restore it to its original condition. With the economic environment of the last ten years, dilapidation claims have become more prevalent with landlords being eager to find alternative ways of generating return without large rental increases.
Pre-contract stageBefore entering into any contract, particularly one relating to the provision of construction services, parties should try to ‘do their homework’ on the other side. This would entail finding out as much information as you can about your contracting party, by talking to friends and colleagues within the industry, carrying out internet searches to establish any recent news or articles on the company and also carrying out searches at Companies House. More importantly, one should always carry out a full credit check on the company with whom you are entering into a contract to ensure the company has a stable financial base and has the ability to carry out the duties and obligations to be performed under the contract.
It goes without saying, but it is also paramount to check the contract documents being entered into. In particular check that the correct company name, number and registered address is being used so that you are certain of the corporate entity you are contracting with. Also ensure that the contract contains what was originally agreed such as correct fee, services and any other specific provisions.
With regard to insolvency, check that the following clauses have been included which will help to protect your position in the event insolvency arises:• rights of termination for insolvency• retention of title clauses• performance bond and/or parent company
guarantee provisions• retention provisions• provisions that require the contractor to confirm
payment to sub-contractors• proactive project management of delays and
other problems.
Whilst works are being carried outThere are a number of measures which represent good practice on construction projects, but also assist to protect an employer’s position in the event that a contractor or sub-contractor run into financial problems. The first is to ensure that you monitor progress regularly and take records of activities on site including photographs. Visit the site frequently and talk to parties carrying out the works to obtain information on any potential problems that may be arising.
If progress begins to slow, find out why. In addition to the regular meetings and/or reports which the contractor provides, convene more regular meetings to discuss the problems to establish whether they can be resolved. Again, visit the site often to discuss issues with those carrying out the works and not just the senior management. Establish if sub-contractors are being paid and if sub-contractors are actually paying those working for them. If any issues arise at this stage, alarm bells should be ringing.
If it transpires that the problems are unlikely to be solved by practical measures due to financial difficulties, an employer should then consider how to use the procedures contained within the contract to protect itself. Ensure that notices which are provided for in the contract are issued promptly, even though you may not, at this stage, anticipate taking the issue any further. The purpose of a notice is to alert the contractor to the procedures under the contract and to preserve your position.
Ensure that as an employer, you have a full set of keys for the site so that if the worst happens, the site can be promptly locked to prevent theft.
© 2018 haysmacintyre | Property Briefing Summer 2018 5
Insolvency in the construction industry – practical measuresUnfortunately, cases of insolvency within the construction industry are not uncommon, particularly on the contracting and sub-contracting side of the business. However, there are a number of measures which can be taken by employers to help when insolvency looms and reduce the losses which will inevitably arise when insolvency occurs. This article outlines some of these practical measures.
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© 2018 haysmacintyre | Property Briefing Summer 20186
If insolvency is imminent consider whether a right to terminate has arisen. Even though insolvency of the contractor may represent a ground for termination, make sure insolvency has actually occurred before you terminate. If an employer terminates a contract ahead of actual insolvency then this may represent an accidental repudiation giving the contractor the rights to claim damages. It is possible to terminate a contract ahead of insolvency provided the contractor has committed another act which constitutes grounds for termination, such as failure to progress the works. Check the contract and follow the contractual procedures strictly.
If insolvency is likely but not imminent, consider whether direct payments to sub-contractors will help, but ensure that you enter into a separate agreement with the contractor in order to avoid the potential for double payment later on. The alternative to a direct payment agreement is to arrange for sub-contracts and supply agreements to be novated to the employer. However, again, this can only be done with the agreement of the contractor unless the contracts already provide for it.
After insolvency and/or terminationThe first obvious thing to do following termination is to secure the site, install new padlocks etc, and employ additional security to protect against theft and unwanted visitors. Unfortunately, the result of contractor insolvency is usually sub-contractors and suppliers not being paid. When this happens, understandably, sub-contractors and suppliers may try to recover some of their goods and plant from the site so that they can recover some of their losses.
Following insolvency, take detailed records of the state of the site and progress of the works carried out with photographs and other written records confirming the date on which the record was taken. If possible, agree this with the contractor.
Insolvency of the contractor may mean that the contractor no longer continues to pay premiums for the contractor’s all risk insurance. If this is the case, the employer should take out an additional policy to make sure that the works are insured against specified perils including fire and theft.
Following insolvency and/or termination, most contracts give the employer the right to finish off the works themselves or with another contractor and then to recover losses incurred from the contractor following completion. It is important in these circumstances to note that, even though the employer may wish to complete the works, it must take steps to mitigate its losses to ensure that any costs incurred in completing the works are recoverable.
If the employer chooses to employ another contractor to complete the works, it is imperative that accurate records are taken of works carried out by the new contractor. Ensure all paperwork is in order and that the contracts properly identify the extent of the work to be carried out by the new contractor.
With regard to materials purchased and paid for in previous interim applications with the insolvent contractor, check that appropriate vesting certificates are in place and also check retention of title clauses to ensure that the employer has the right to ownership of the materials following payment and or installation at the site.
Finally, if Building Information Modelling (BIM) is used on the project, ensure access is closed to the system to ensure parties who may be owed money cannot disrupt or change any of the designs already placed on the system.
Recovery of lossesWhilst the employer may ultimately seek to recover any additional costs it incurs as a result of the insolvency, it is likely that many of these losses will not be recoverable due to the fact that the contractor may have a large number of creditors all seeking to recover losses from the insolvency process. Accordingly, the employer may need to explore other routes in order to recover some of its losses. These include checking if there is a performance bond and/or a parent company guarantee in place and how much may be recovered under these documents. The performance bond is only likely to pay out 10% of the contract sum and whilst this may be a reasonable amount, it may not be enough to cover all the losses incurred by the employer, particularly if the employer chooses to complete the project by employing another contractor.
On the other hand, if there is a parent company guarantee in place this would normally allow the employer to recover all of its losses, but check to see if the parent is still solvent following the insolvency of the contractor.
Notwithstanding the above, make sure that a proof of debt is submitted as soon as the losses incurred can be quantified so that this can be included as part of the insolvency process.
SummarySadly, it is not uncommon for those involved in an insolvency process to lose some of their money, one way or another. However, if you are not the insolvent party, taking practical measures as outlined above can help to ease the pain.
Michael ChiltonEMW LLP T 0345 070 6000 E [email protected]
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© 2018 haysmacintyre | Property Briefing Summer 20188
UK property tax
The taxation of property owned in the UK by non-residents has undergone a number of changes in recent years and, with further changes announced and consultations issued, will continue to do so in the future. In this article we look at the recent changes and what is to come.
Income TaxAll rental income arising on property owned in the UK by a non-resident is subject to income tax. The amount due is either basic rate tax (currently 20%) on the gross rents, or alternatively on the net profit after costs under the non-resident landlord scheme (NRL). Non-residents may be able to get credit for the UK tax suffered but this will depend on the jurisdiction in which the individual resides.
Relief for interest paidThe tax relief for individuals on interest paid on qualifying loans against rental income is gradually being restricted each year, such that only basic rate relief on interest will be available from 6 April 2020. The restriction is being phased in as follows:
Tax year % of interest % of basic rate deductible from tax reduction rental income
2017/18 75% 25%2018/19 50% 50%2019/20 25% 75%2020/21 0% 100%
NRL companies already receive relief at basic rate, as that is their rate of tax charge, but from 6 April 2020 will be charged to corporation tax as opposed to income tax as at present. Although outside the scope of this article, this move into the corporation tax regime will bring NRL companies into the scope of the corporate interest restriction rules. These rules, which can result in a restriction of interest against profits for tax purposes when the group net interest charge exceeds £2 million, are complex and, if they might apply, should be considered well in advance.
Annual Tax on Enveloped Dwellings (ATED)ATED is a type of property tax and when it was first introduced on 1 April 2013 it applied to properties with a value of more than £2 million. However, it is now levied on dwellings (residential properties) in the UK valued at more than £500,000 and owned by a company, a partnership in which one partner is a company, or a collective investment scheme.
The amount of tax you have to pay will depend on the valuation attached to the property which is taken either as at 1 April 2017 or the date of acquisition, if later. The following charges are effective for the return for the year beginning 1 April 2018.
Property value ATED Charge
£500,000-£1 million £3,600£1-2 million £7,250£2-5 million £24,250£5-10 million £56,550£10-20 million £113,400Over £20 million £226,950
Reliefs and exemptionsThere are various reliefs and exemptions from ATED but these are not automatically given so an ATED return must be filed to claim a relief. These essentially relate to use of the property for development or rental to unconnected tenants at a commercial rent, and charities and public bodies.
Stamp Duty Land Tax (SDLT)SDLT is payable at the following rates on the acquisition of UK property.
Residential property ratesThe SDLT regime for residential property changed to a progressive system on 4 December 2014.
The bands and rates are as follows:
Market price Rate
£0-125,000 0%£125,001-250,000 2%£250,001-925,000 5%£925,001-1,550,000 10%£1,500,001 and over 12%
The calculation method is simply to apply the rates specified to the parts of the relevant consideration falling within each band.
Higher rates for additional dwellings and dwellings purchased by companiesFrom 1 April 2016 the rates charged on the purchase of an additional residential dwelling by an individual, costing more than £40,000, has been 3% above the applicable residential SDLT rates quoted above.
This also applies on residential properties, bought by a non-natural person (essentially a company) and costing less than £500,000. However, for non-natural persons, if the cost is above £500,000 a 15% rate applies, unless the dwelling is used for a qualifying purpose, such as property rental, property development, property made available to the public or farmhouses. In such situations the rate will still be 3% higher than in the adjacent table such that for a company the top rate of SDLT on a residential property costing £500,000 would be 8% and would not reach 15% until the residential property is worth at least £1.5 million.
Of course, such companies may also be subject to an ATED charge (discussed above) and, broadly, if the property is subject to an ATED charge the 15% SDLT rate will apply.
SDLT rates on non-residential propertyThe SDLT regime for non-residential and mixed use property changed to a progressive system on 17 March 2016.
Non-residential property includes commercial property such as shops or offices, agricultural land, any other land or property which is not used as a dwelling and six or more residential properties bought in a single transaction. A mixed use property is one that incorporates both residential and non-residential elements.
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The new rates are as follows:
Market price Rate
£0-150,000 0%£150,001-250,000 2%Over £250,000 5%
As with the residential rates, the relevant SDLT rate is applied to the relevant part of the consideration that falls into each band.
From 1 March 2019, the payment deadline for SDLT will be reduced from 30 to 14 days after completion.
Capital Gains Tax (CGT)Since April 2013, ATED-related CGT applies to any person who makes a disposal of UK residential property which has, during its ownership, been subject to the ATED charge. The gain is calculated on the uplift from the April 2013 value, but can be calculated by reference to the time apportioned element of the entire period of ownership if that results in a lower gain.
ATED-related CGT is charged at a flat rate of 28% – there are no allowances available to reduce the gain (ie no indexation allowance and no annual exempt amount).
Since April 2015 non-resident Capital Gains Tax (NRCGT) has been introduced and applies much more widely than ATED-related CGT. It applies to all non-resident persons (individuals, corporations, trustees etc.) on the disposal of UK residential property. Once more, the gain is calculated on the uplift from the April 2015 valuation but can be calculated by reference to the time apportioned period of ownership, if that results in a lower gain.
The disposal of the property has to be reported within 30 days. If the seller is not within the self-assessment regime the tax has to be paid within the same 30-day time frame. The sale has to be notified whether or not there is any tax payable. The NRCGT is charged at the rates which would be charged if the non-resident person was UK resident.
Companies are liable to NRCGT at a rate of 20% and, until 1 January 2018, were subject to indexation allowance to allow for the effect of inflation on the acquisition costs to be taken into account.
If both ATED–related CGT and NRCGT apply, the ATED-related CGT takes precedence. Even if no NRCGT is due owing to this rule, a return must still be made to avoid a penalty.
Inheritance Tax (IHT)IHT is charged on the basis of domicile rather than residence. A UK domiciled individual is charged to IHT on a worldwide basis; a non-UK domiciled individual is charged to IHT on UK situs assets only.
Historically, non-domiciled individuals would hold UK property via a non-UK company. The assets they personally owned were shares in a non-UK company so were non-UK situs and IHT was, accordingly, not chargeable. The introduction of the ATED charge, mentioned above, allowed individuals to keep that IHT protection at the cost of the annual fee.
However, since April 2017, to the extent that shares (or other interests, including loans) in non-UK close companies (meaning, broadly, that they are controlled by five or fewer persons) and interests in overseas partnerships, derive their value from UK residential property, that value will be within the scope of IHT. There is no relief or repayment in relation to any previous or ongoing ATED charges. This also includes exit or periodic charges from a discretionary trust.
This will be the case regardless of whether the individual is UK resident or non-UK resident. The new rules will override all double tax treaties. Interests whose value, when amalgamated with interests of ‘connected persons’, is less than 5% of the total value of a close company or partnership will be disregarded.
Two year tailFollowing the sale of close company shares or partnership interests which would have been within the scope of the new IHT rules, or repayment or disposal of a Relevant Loan, the consideration received (or anything which represents it) will continue to be subject to IHT for a two year period following the sale or repayment. The value subject to IHT will be capped at the amount of the consideration or repayment, where there is a subsequent increase in value.
These tracing provisions may give rise to an IHT charge in normal commercial situations even where UK residential property is no longer held.
Targeted anti-avoidance ruleAny arrangements whose whole, or main purpose, is to avoid or reduce the IHT charge on UK residential property will be disregarded. This anti-avoidance provision is extremely widely drawn.
Future changesCommercial propertySubject to consultation, the UK Government has announced that they intend to widen the scope of NRCGT to include the disposal of any UK real estate, including commercial property, from April 2019. As with residential NRCGT, it is anticipated that it will rebase the assets so that only post April 2019 gains will be chargeable.
Non-UK entities that are currently outside the scope of UK CGT on residential property gains, by virtue of being widely held (for example certain funds), will be subject to tax on all gains realised on their UK property assets under the new regime.
The new rules will apply to certain sales of interests in ‘property rich’ vehicles, as well as to sales of real estate assets themselves. A property rich vehicle is one that ultimately derives at least 75 per cent of its gross asset value from UK real estate, and gains on a disposal will be chargeable where the person making the disposal holds (or has held in the last five years) a 25 per cent or greater interest in the vehicle.
Certain of the UK’s tax treaties preclude the UK from taxing gains realised by non-residents on sales of interests in vehicles holding UK land, subject in some cases to certain conditions being met. The treaties will ‘trump’ domestic legislation so investors based in these jurisdictions may escape the new regime. However the new regime will include anti-avoidance measures designed to counteract attempts to restructure property holdings after this announcement in a way that takes advantage of favourable tax treaties.
CGT payment dateNon-residents, not within the self-assessment tax system, already have a reporting and payment deadline of 30 days from completion of a sale subject to NRCGT. HMRC have issued a consultation that from April 2020 the CGT due on any sale of residential property (UK or overseas) will be subject to a 30 day reporting and payment obligation.
Trevor D’SaPrivate Client Tax Director, haysmacintyreT 020 7396 4365E td’[email protected]
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© 2018 haysmacintyre | Property Briefing Summer 201812
In order for a dwelling to qualify for the zero rate of VAT a number of conditions must be met. These are set out in Note 2 to Group 5, Schedule 8 of the Value Added Tax Act 1994 (VATA 1994) which states;
“A building is designed as a dwelling or a number of dwellings where in relation to each dwelling the following conditions are satisfied:
(a) the dwelling consists of self-contained living accommodation
(b) there is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling
(c) the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision
(d) statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent.”
It was condition (c) that was challenged by HMRC in the case of Summit Electrical Installations Ltd v HMRC which was initially heard at the First Tier Tribunal before an appeal was made by HMRC to the Upper Tribunal.
Summit Electrical Installations Ltd (Summit) was appointed as sub-contractor for a new development known as Primus Place, a new block of student flats in Leicester. Summit zero rated their services on the basis that this was a supply in the course of construction of a building designed as a dwelling or number of dwellings, or alternatively that it would be used solely for a relevant residential purpose as per Item 2, Group 5 Schedule 8 of VATA 1994 which states:
The planning permission granted by Leicester City Council included a condition that of the 140 flats included in the development, a minimum of 126 flats were required to be occupied by students and no person, other than a full time student attending the University of Leicester or DeMontfort University, should occupy the flats (other than staff associated with the maintenance and security of the development). HMRC took the view that this prohibited the separate use or disposal of the dwelling therefore condition (c) was not met and the new flats could not qualify as dwellings for the purpose of zero rating.
HMRC took the view that condition (c) was not met if there was any restriction included within the planning permission. However, both the First Tier Tribunal, in their original decision, and the Upper Tribunal, when dismissing HMRC’s appeal, made the distinction between a term within the planning permission which required the building to be used by a particular person, or persons, and a term within the planning permission which required the building to be used by a person, or persons, at a particular address. It was this link to specific land or premises which the Upper Tribunal viewed as being crucial and was not present in the case of Summit.
To zero or not to zerothat is the questionZero or not? A recent case heard at the Upper Tribunal has provided some clarity regarding one of the conditions that needs to be met in order for a new building to be seen as a dwelling for the zero rate of VAT to apply.
In the initial judgement by the First Tier Tribunal they referred to the two earlier Upper Tribunal decisions of HMRC v Shields and HMRC v Burton. In HMRC v Shields, the Upper Tribunal stated, “That the phrase ‘separate use or disposal’ referred to use or disposal that is separate from the use or disposal of some other land. A term prohibiting use for a particular activity or disposal generally would not fail to satisfy Note 2(c) unless the effect of the term in that particular case was to prohibit use or disposal separately from use or disposal of other land.”
Both the First Tier Tribunal and the Upper Tribunal made the same point. Although the planning permission in respect of the flats specifically stated that the flats must be occupied by the students of the University of Leicester or DeMontfort University, there is no reference to the use of the new development in connection with a particular university campus or a particular site, only in connection with a particular university.
The Upper Tribunal commented, “A university is not just a building or collection of buildings; it is an educational institution. Like other educational institutions, a university can change its physical location.” The Upper Tribunal went on to make the point that if any of the universities named in the planning permission were to move to a new site, this would not result in a breach of the planning permissions because the flats were being let to students attending courses at the new site.
Though this case was specific to dwellings, it is a useful reminder of the potential pitfalls in respect of the zero rating conditions and the importance of obtaining timely professional advice.
Phil SalmonHead of VAT and Partner, haysmacintyre T 020 7969 5611 E [email protected]
Stephen PateyVAT Manager, haysmacintyre T 020 7969 5684 E [email protected]
© 2018 haysmacintyre | Property Briefing Summer 2018 13
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