Zero-rating new construction, barn conversions including demolition

[Drellingore]

Is anyone aware of any planning legislation that precludes the demolition-to-the-ground of a building (in this case barn) that's being converted?

 

VAT Notice 708 Section 3.2.1 lays out the criteria under which new construction can be eligible for zero-rating. One type of qualifying building is where any previous building is demolished to the ground before new construction takes place.

 

Whilst we're still going through planning, the previously-approved scheme included the description "existing buildings to be demolished". The barn in question is a non-designated heritage asset and the internal frame will likely need to be retained, however the most sensible route is to take it down, treat it, and re-erect it. If there is a point when no above-ground part of the building is still standing, then it seems clear that this is new construction and can therefore be zero-rated (otherwise why the provision detailing under what circumstances it's okay to zero-rate when there was a prior building?). However, is there some general planning rule or regulation that would consider it a breach of consent if a converted building was entirely taken down for some period of time?

 

I've got a vague recollection of a potential main contractor telling me about a barn conversion that he was working on where they had to take down half the barn, build the new half, then take down the other half, and then build that and join it up. The purpose was so the original building was never completely taken down, but I can't remember if that was down to some specific planning condition on that site, or because of a general principle. Any thoughts?

 

Ta in advance.

Edited January 19, 2023 by Drellingore
adding link

[Drellingore]

For those interested, the HMRC VAT Construction Manual says:

 

Quote

Note 18 requires any pre-existing building to be demolished to ground level. Ideally that building should be completely demolished before work to construct a new building is started. This view was supported by the Tribunal in Alec A Bugg (VTD 15123).

However, under certain circumstances we will accept the demolition test as being passed should construction start before demolition is complete. So long as at no time does the new building under construction combine with the fabric of the pre-existing building, we will see the test as being passed.
 

This approach has been supported by the Tribunals in ED Bruce (VTD 6326) and Mark Tinker (VTD 18033).

In ED Bruce, the appellant replaced a farmhouse in two operations of partial demolition followed by construction. Construction was adjacent but separate from the remainder of the original building, with the gap between the two protected from the elements by temporary corrugated iron sheeting and slates. The second phase saw the house constructed to completion following demolition of the rest of the original farmhouse.
 

The Tribunal did not consider the works to be work to an existing building.

 

Edited January 20, 2023 by Drellingore
fixed typo

[Temp]

On 19/01/2023 at 14:15, Drellingore said:

Is anyone aware of any planning legislation that precludes the demolition-to-the-ground of a building (in this case barn) that's being converted?

 

If your planning permission is for a conversion, but instead you knock it down intending to rebuild it, then the planners can declare its in breach of your planning permission. You have to reapply for a knock down and rebuild which might be refused on the grounds it would be a new house in the countryside.

 

In one case I heard about the walls were only demolished because Building Control said they weren't stable enough. Sometimes the owner has appealed and won but I wouldn't want the stress.

 

 

[IanR]

On 19/01/2023 at 14:15, Drellingore said:

Is anyone aware of any planning legislation that precludes the demolition-to-the-ground of a building (in this case barn) that's being converted?

 

Assuming this is for a residential conversion, then your planning with be something like: "Change of Use from X to C3 Residential". That "Change of Use" planning permission stops the conversion from being zero rated.

 

If you did completely remove the primary structure, you would also be in breach of the planning permission.

 

As a Change of Use to Residential, while it's not zero rated, but rated @ 5%, that 5% is recoverable by the self-builder at the end. So it's a cash-flow issue, rather than a cost issue.

Edited January 20, 2023 by IanR

[Temp]

 

 

[Drellingore]

Interesting on the Class Q front. As we're in an AONB we don't have any permitted development rights, so it's an application 'in its own right'.

I'm on hold to the self-build reclaim helpline to ask for their opinion. I wonder what the odds are of anyone answering the phone before the heat death of the universe?

[IanR]

3 minutes ago, Drellingore said:

Interesting on the Class Q front. As we're in an AONB we don't have any permitted development rights, so it's an application 'in its own right'.

 

The rules aren't specific to Class Q, they are specific to a Change of Use, in layman's terms, a conversion.

[Drellingore]

I shouldn't cast aspersions on HMRC! I got through after twenty minutes, and they reiterated that if it was taken down to the ground, then that would be considered "new construction". They said the description in the planning permission would suffice, and that from their point of view, it doesn't matter if it's a conversion or change of use. When I asked what evidence would be required, they said the planning notice and accompanying documents, and in some cases a photo. I gave the example of an internal frame needing to come down, be treated, and then be reinstated, and they said that was fine.

 

Of course, both HMRC would need to consider it a new build and I'd need to be sure in doing so I don't break any planning rules, which brings us to...

 

11 minutes ago, IanR said:

The rules aren't specific to Class Q, they are specific to a Change of Use, in layman's terms, a conversion.

 

Thanks! Any idea where these rules are written down? I've read the NPPF and our Local Plan, but that's more about how to make a decision, rather than what certain terms mean. I'm at a bit of a loss of how to find the source of truth on these sorts of issues.

Edited January 20, 2023 by Drellingore
adding internal frame bit

[IanR]

 

7 minutes ago, Drellingore said:

Thanks! Any idea where these rules are written down? I've read the NPPF and our Local Plan, but that's more about how to make a decision, rather than what certain terms mean. I'm at a bit of a loss of how to find the source of truth on these sorts of issues.

 

With regards to the planning rules - within many different Planning "Statutory Instruments" (publicly available on the Gov.UK site), although there is also Gov.UK Planning guidance site that covers their interpretation and can be easier to digest, although it is high level so doesn't necessarily get into the detail.

 

The logic to what appears to be your situation is that, due to NPPF rules the site you have wouldn't be appropriate for a new build. Perhaps it's in the open countryside where the rules are strongly against development "unless there are very special circumstances". Included in those very special circumstances is the re-use of existing buildings.

 

If you are then relying on that caveat to the "strongly against development" rule, you have to base your planning application around the re-use of the existing building(s) on the site. There are then rules about the existing building(s) needing to be structurally capable of conversion to residential with reasonable works.

LPA's may treat this slightly differently, although Appeal results tend to keep them within close boundaries of how that is to be interpreted. My local LPA, for instance, has very specific rules about how much of the original frame must exist within a finished conversion of a traditional Essex Barn. They've settled on a figure of 67% and you have to demonstrate how this is going to be achieved. A neighbouring Barn conversion received some storm damage in the early days of its conversion, when the frame was exposed and the scaffold was erected. The LPA issued a stop notice and the owners had to go back to planning to show how they were still meeting the 67% requirement, taking into consideration the portion of the frame that had been damaged.

 

Since you are relying on the re-use of an existing building for your development and that buildings be capable of conversion, a significant proportion of it has to remain in place for the development for it to be within the rules of the planning approval you have.

[Drellingore]

Ta, I might try digging through the statutory instruments and guidance site, more out of curiosity than anything else. Given that it'll all be reclaimable eventually anyway, as you say, it's more of a cashflow optimisation with a small payoff and a large potential for calamity.

[Temp]

On 19/01/2023 at 14:15, Drellingore said:

Whilst we're still going through planning, the previously-approved scheme included the description "existing buildings to be demolished". The barn in question is a non-designated heritage asset and the internal frame will likely need to be retained, however the most sensible route is to take it down, treat it, and re-erect it.

 

I would always recommend applying for what you want/need if there is a slight chance they will agree.

 

So I would apply to "Dismantle and rebuild as a dwelling". Sounds better than a demolition. Specify exactly what is to be reused in the rebuild. If they refuse that switch to a conversion.

 

Either way you should get all the VAT back. Its either zero rated or 5% and reclaimed. 

 

Take photos of the empty site to prove it was demolished if you go for zero rating route.

 

Edited January 20, 2023 by Temp

[Temp]

PS Don't forget the CIL. No work on site until you have done the exemption paperwork.