Annexe or extension?

The recent tribunal decision of Gateshead Jewish Nursery held that a single storey rear addition to an existing nursery facility operated by a charity was an extension and not an annexe with the consequence that works were VAT standard rated. If the structure had been classified as an annexe and met the other conditions for zero rating (i.e. separate access not via existing building and capable of independent function) then the works could have been zero rated.  


The floor plan above shows the property concerned. This case highlights the potential benefits of early consideration of the VAT rules as the design of the new building and subsequent planning application could have been drafted with these specific VAT rules in mind.