Alms House Charity Scores Important Tax Victory

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A charity which for almost 800 years has provided homes for elderly people in need has won an important victory over HM Revenue and Customs (HMRC) in respect of the VAT treatment of a purpose-built block of flats which formed the modern equivalent of alms houses.

The charity had, through a wholly-owned subsidiary, built the block, which consisted of 18 self-contained flats occupied by poor and needy pensioners. HMRC accepted that the construction costs were zero-rated for VAT but found that it was ‘a building designed as a number of dwellings’. That decision had crucial implications for the VAT treatment of the site as a whole and the subsidiary appealed.

Following a preliminary hearing, the First-tier Tribunal (FTT) upheld the subsidiary’s argument that the building was a single ‘institution’ which provided ‘personal care’ for persons in need. Although residents enjoyed a great deal of autonomy, they were bound by a list of institutional rules and regulations and did not enjoy any security of tenure. Some residents required more assistance than others; however, they all received differing levels of personal care. Further issues in the case were left over for argument at a later date.