Taxing question for rural live/work
We’re publicising it here to ask if anyone with experience of converting a barn, other rural building or similar might be able to offer Paul some helpful advice.
A few years ago Paul and his wife bought a long unused stone cowshed in rural north Yorkshire which they painstakingly converted into what Paul describes as a ‘lovely modern home and a very comfortable set of offices’.
Primrose Barn lies 0.8km down a farm track between an abandoned village and the small Ryedale village of Terrington in north Yorkshire. The Cussins got planning consent from Ryedale District Council for change of use of redundant farm buildings to form residential accommodation, offices and a workshop.
To this end they employed an architect who drew up plans to convert Primrose Barn, a single building surrounding on three and a bit sides a central courtyard, into a property that would – in keeping with the council’s requirements – maintain 51% for business use. The remaining 49% was converted into residential use.
In keeping with LiveWork Network’s own model for live/work properties, the Cussins ensured separate access to the residential and business parts of the property. ‘I don’t want to walk from my bathroom into the store,’ he said. ‘And I don’t want my staff walking into my bathroom.’
Two years ago the conversion works were completed and a certificate approving them was issued by the council’s building control officer.
Mr Cussins runs his retail property management business from his offices in Primrose Barn. The business has grown since they moved there and he has taken on four staff. He occupies the residential part of the building with his wife and two young children.
Sensibly he claimed back through his business returns the VAT on work spent creating the work part of the premises.
He also submitted a VAT claim for the residential proportion under HM Revenue & Customs’ Public Notice 719, which states that you can claim ‘if you buy eligible goods and services [to] convert an non-residential building into a qualifying... dwelling [where] the dwelling has never been used as a dwelling or number of dwellings’.
There is no query over the latter. According to Mr Cussins, the man he bought Primrose Barn from described it these colourful terms. “The floor was that deep in cow shit that the cows were knocking the tiles off the roof with their heads”.
The difficulty appears to lie in the refusal of HMRC to recognise the residential part of Primrose Barn as Mr and Mrs Cussin’s ‘dwelling’, stating that it couldn’t be a dwelling because ‘it cannot be used or disposed of separately’ to the work part.
Mr Cussins took his case to a tax tribunal which ruled that the barn is not a live/work unit because ‘the commercial part is a different legal entity with a distinct legal estate in its own premises’.
Ryedale DC says Primrose Barn is a dwelling and charges the Cussins council tax on the residential part and business rates on the commercial part. North Yorkshire County Council’s building control division says it is a dwelling.
Mr Cussins believes his family’s use and occupancy of the building complies with the definition in government Notice 708 of ‘a property that combines within a single unit a dwelling and commercial or industrial working space as a requirement of planning permission.’
HMR&C does not deny that the Cussins family live in Primrose Barn but seem adamant it is not a dwelling by their definition and that it is equally not a live/work unit so therefore cannot be eligible for a VAT refund.
If you know of any precedent that the Cussins might find helpful, please get in touch with Paul on paul@candl.co.uk. We’d also be interested in hearing from you. Email lisathompson@liveworknet.com.
