© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
- Conversion requires building to retain its identity, even if form changes
"[24] We take the view that as a matter of straightforward language, "conversion" does require a continuity of identity between the old building and the new [25] We are considerably fortified in taking this view from the Court of Appeal decision in Marchday in which Stuart-Smith LJ endorsed the following:
"the words "conversion", "alteration" and "enlargement" seem to me to connote a state of affairs in which the building upon which such works are done necessarily remains after they are done. One cannot sensibly describe any of these three descriptions to a case where the old building is, in effect, destroyed; it continues to exist though it may have been substantially transformed".
[26] We accept that this was a VAT case, and Mr Edwards, certainly initially, suggested therefore that it was of limited value in the case of allowances. But the Judge was making a general point about the meaning of these words, and we do not believe that it cannot be read across into our interpretation of the word "conversion" in the context of allowances. It is of much more general application. And, as we say, by the end of the case it seemed to us that Mr Edwards accepted that this was applicable in this appeal." (FRF (South Wales) Limited v. HMRC [2024] UKFTT 1145 (TC), Judge Popplewell)
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Solely for a relevant charitable purpose​
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- De minimis non-charitable use
"[5] Although the wording of the Act requires that, to attract zero-rating for construction services, a building must be intended "solely" for use for a relevant charitable purpose, otherwise than in the course or furtherance of a business, HMRC accept that up to 5% business use of the building can be ignored as de minimis. The College has conceded that the provision of courses to students paying full unsubsidised fees in the new building amounts to business use, but it represents a very small proportion of the activity within the building. If the provision of further education to students paying a fixed, subsidised fee is also, as HMRC submit, made in the course or furtherance of a business, then business use of the new building would exceed 5%." (Wakefield College v. HMRC [2018] EWCA Civ 952)
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