[2011] UKFTT 652 (TC)
TC01494
Appeal number: TC/2009/14332
VAT –
DIY builders and converters refund scheme – whether building ceased to be
existing building – whether what was retained was no more than a single façade
– whether its retention a condition or requirement of statutory planning
consent or similar permission – note (18), Group 5, Sch 8 VATA
FIRST-TIER TRIBUNAL
TAX
JONATHON
BERRY LIMITED Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
JUDGE ROGER BERNER
Sitting in public at 45 Bedford Square, London WC1 on 4 August 2010
The Appellant did not appear
and was not represented
Rory Dunlop, instructed by the
General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT
2010
DECISION
Having heard Rory Dunlop, instructed by the General
Counsel and Solicitor to HM Revenue and Customs for the Respondents. The
Appellant did not appear and was not represented, but the Tribunal was shown
copies of e-mail correspondence from the Appellant referring to the hearing and
making certain representations. The Tribunal was satisfied that the Appellant
had been notified of the hearing and that it was in the interests of justice to
proceed.
The Tribunal decided that the appeal is dismissed.
Summary findings of fact and reasons for the decision
1. The
Appellant appeals against the decision of HMRC of 26 August 2009 to refuse the
Appellant’s claim for a VAT refund totalling £7,541.18 under the DIY Builders
and Converters Refund Scheme. That claim is made on the basis that the works
carried out by the Appellant amounted to the construction of a building
designed as a dwelling within section 35(1A) of the Value Added Tax Act 1994
(“VATA”).
2. There
is one question for us to determine in this appeal, with two issues. The
question is whether the works are prevented from being the construction of a
building because what has been done is either the conversion, reconstruction or
alteration of an existing building, or an enlargement or extension of an
existing building within note (16) to Group 5 of Schedule 8 VATA. This turns
on when a building ceases to be an existing building, which is dealt with by
note (18). To cease to be an existing building it must be demolished
completely to ground level, or, if not demolished completely, the part
remaining must consist of no more than a single façade or, where a corner site
a double façade, the retention of which is a condition or requirement of
statutory planning consent or similar permission. The two issues in this case
are, firstly, whether what was retained is no more than a single façade (the
property in question not being on a corner site), and secondly, if there was
just a single façade retained, was that retention a condition or requirement of
the planning consent that was obtained.
The facts
3. We
did not have the benefit of oral evidence from, or on behalf of, the
Appellant. Our findings of fact are accordingly made by reference to the
documentary evidence produced to us and which we have considered.
4. Planning
permission under reference number LW/07/1516 was granted to the Appellant on 28
February 2008 for:
“… Remodelling of bungalow comprising ground floor
extension and new roof to facilitate three bedrooms and bathroom within roof
void, revision to LW/07/1146
At 74 Northwood Avenue Saltdean East Sussex BN2 8RG
PARISH: Telscombe
to be carried out in accordance with Plan and
Application No. LW/07/1516 submitted to the Council on 30 November 2007.”
No plans in respect of this planning permission had been
supplied by the Appellant to HMRC or to the Tribunal.
5. The
works went ahead, but it appears that they were not carried out in accordance
with the original plans. What was involved instead was a partial demolition.
Retrospective planning permission under reference LW/08/0819 was granted on 4
September 2008 for:
“… the retention of a ground and first floor
extension to form chalet bungalow including partial demolition of existing
building and garage (amendment to planning permission LW/07/1516) … to be
carried out in accordance with Plan and Application No. LW/08/0819.”
6. In
the case of the retrospective permission, two plans on which the decision was
based were attached. One was of the existing (which we take to be the
original) building, and the other showed the elevations and a typical section
of the building for which permission was granted. This second plan (referenced
A336 05 A), a revised version of which (A336 05 B) which was the subject of
subsequent conditional approval for building control purposes on 12 January
2009, has notes to the typical section, one of which shows, by reference to an
arrow indicating internal walls, a “Line of existing walls and foundations”.
We had no plan of the new building with the September 2008 permission, but a
document entitled “Proposed Plans – revised” and dated November 2007 was
attached to the building control approval. There was no reference in that plan
to the retention of existing walls.
7. On
4 February 2009 a Certificate of Completion under the Building Regulations 2000
was issued specifying as details of the works: “Construction of new dwelling
utilising some pre-existing structure”. This description was confirmed as an
accurate reflection of the works by Mr R A Carsons, Head of Building Control at
Lewes District Council, in an e-mail to the Appellant of 27 May 2009 which
confirms Mr Carsons’ understanding that the Appellant had chosen to retain a
minimal amount of original structure in the area of some building services
which would otherwise have been complicated or expensive to re-route. He also
offered the view that to all intents and purposes the building was effectively
a “new dwelling” with a specification meeting current Building Regulations
requirements. The e-mail from the Appellant to which Mr Carsons was replying,
which was also dated 27 May 2009, had asked him to “advise the reasons we kept
the existing walls”.
8. Following
enquiries by HMRC of Lewes District Council, two responses were received:
(1)
On 17 June 2009, Mr S J Howe, Area Team Leader (South), Planning
Services confirmed firstly that the building was not on a corner site (meaning
that, at maximum, a single façade could be retained for these purposes), and
secondly he enclosed a plan marked to show the areas which were understood to
be the parts of the original bungalow that had been retained. We were shown a
copy of this plan. The walls marked are the external walls of the kitchen on
the north and west elevations, and internal walls dividing the utility room
from the kitchen and bathroom, the bathroom from a bedroom and a bedroom from
the living room and the other bedroom.
(2)
On 20 July 2009, Mr Carsons provided information from the surveyor who
had made the site inspections. At the inspection on 28 May 2008 some of the
walls, both external and internal, had been removed, but others were intact.
Subsequently, on 30 July 2008, referring to external walls, the surveyor
reported that she believed the only original wall remaining was the front wall
of the previous kitchen extension, described as the left half of the north west
elevation. (This is a little confusing, as all the plans refer to north and
west etc elevations; for consistency, we believe that what is referred to here
is what we regard as the west elevation, the side of the building where the
front door is sited.) As regards this second visit, the surveyor makes no
reference to internal walls.
9. We
did not have the benefit of hearing from the Appellant, or any evidence on his
behalf. We also had very little information at all from the Appellant. His
notice of appeal set out the following grounds:
“Please find enclosed the credit note issued by
Lewes Council, following the property deemed as zero rated. Following the
planning permission being granted as a new build development. We were advised
by the head of building control to carry out five alterations e.g. movement of
velux to ensure that a completion cert would be issued, which incurred
additional cost of £2,000 approx. The development at the point of demolition
the said “remaining wall” was 12ft long and 4 ft high to secure all the
services, water, gas + electricity which would have cost more to move. After
taking advice we have chosen to appeal and approached our local MP. Desmond
Taylor has supported us and believes the HMRC has interpreted the legislation
far too narrowly and feels the first decision is unreasonable.”
10. As we referred
to above, the Appellant also wrote two e-mails to HMRC’s Solicitors’ Office
which he asked to be produced to the Tribunal. He says that whilst building
the house the Council advised him to try and achieve new build status by
altering, at his cost, a few items that had already been finished. He says
that he did this, and achieved a new build certificate. The Tribunal
understands this to be the Building Regulations Certificate of Completion, and
the reference to “new build” to be to Mr Carsons’ e-mail of 27 May 2009. The
Appellant describes “the wall in question” in his e-mail of 12 July 2010 as
approximately 12 metres long and 2 feet high, and in his e-mail of 30 July 2010
as approximately 6 metres long and 2 feet high. He refers to this wall as the
only part of the “existing” (which we take to mean the original) building
left. He reiterates the points about the wall remaining in order to
accommodate the services, and the intervention of Mr Turner MP.
11. As regards Mr
Turner MP, we were shown a copy of a letter dated 15 July 2009 sent by him to
HMRC in which he refers to the refund of VAT by the Council, and continues:
“From what Mr Berry tells me only a small section of
the two walls were retained, and having seen full details of the plans the
local council acknowledge that the new build will use some existing structure.
Given that the local council has refunded the VAT element of building control
fees, I am at a loss to know why HMRC are failing to do the same.”
Issue (1) – Was only a single façade retained?
12. The burden of
proof is on the Appellant who has asserted that the wall in question is the
only part of the original building that remained. On the evidence before us,
we are unable to accept that as a matter of fact. We find that, on the balance
of probabilities, there remained parts of two walls or facades and a number of
internal walls. The evidence on which we base this conclusion is:
(1)
The e-mail of 27 May 2009 from the Appellant to Mr Carsons, in which he
refers to existing walls in the plural.
(2)
The plan enclosed with the letter from Mr Howe dated 17 June 2009 shows
Mr Howe’s understanding that there remained two external walls and a number of
internal walls.
(3)
The Sections plan (A336 05 A), which was one of the plans on which the
retrospective planning permission was granted, and the only one we have seen
that makes any reference to retention of the existing structure, refers to the
use of existing walls in the plural.
(4)
The letter from Mr Turner MP dated 15 July 2009 records the Appellant as
having told him that a section of two walls had been retained.
13. We do not
consider that this evidence can be contradicted either by the Appellant’s own
assertions in this appeal, or by the site inspections reports. Although the
first of those reports refers to the internal walls, confirming that some were
intact, the second report, we find, makes reference only to the external walls,
and not to the internal walls. Although this second report states that the
surveyor believed that there was only one original external wall remaining,
that does not provide sufficient evidence to persuade us that the Appellant’s
own references to walls in the plural, and the Sections plan, must be wrong.
14. On that basis,
we decide that, by virtue of note (18) to Group 5 of Schedule 8 VATA, the
building did not cease to be an existing building as it was neither demolished
to ground level nor did the part remaining consist of no more than a single
façade. The works carried out by the Appellant did not therefore amount to the
construction of a building, and accordingly the works were not within section
35(1A) VATA.
Issue (2) – Assuming a single façade, was its retention a condition or
requirement of statutory planning consent or similar permission?
15. Since we have
decided the first issue against the Appellant, that would be enough to dispose
of this appeal. However, as we heard submissions from Mr Dunlop on the point
we should also briefly refer to the question whether, assuming we had decided
that there was but a single façade, this could satisfy note (18) by its
retention being a condition or requirement of planning permission.
16. We have reviewed
the various planning permissions, in particular the retrospective permission
granted on 4 September 2008. We are satisfied that nothing in the planning
permissions makes the retention of the wall in question a condition or
requirement of the granting of consent. There is no reference in the planning
permissions themselves to the wall in question. There is nothing in the
planning permissions that specifically requires the preservation of any part of
the existing building, and there is no apparent planning reason why such a
requirement would have been imposed in this case.
17. In Kevin
Almond v Revenue and Customs Commissioners [2009] UKFTT 177 (TC), a
tribunal found that where, in a case in which an historic building was located
in a conservation area, there was an express requirement that the development
be undertaken in accordance with the plans, and those plans showed the relevant
façade to be retained, from notes and annotations on the drawings and in the
detail showing how the new walls and joists were to be attached to the existing
façade, it was a condition or requirement of the statutory planning consent
that the relevant façade be retained. That case is very different from this.
The planning permission of 4 September 2008 does require the works (which had
already been carried out) to be carried out in accordance with the plan. But
although the Sections plan in question does refer to “existing walls”, it does
so without any degree of specificity that would be required to reach a
conclusion such as that in Kevin Almond. Not only does it refer to
existing walls in the plural, the arrow indicating the position of those walls
(and foundations) points in generality only at a typical section, and makes no
distinction between internal and external walls or facades.
18. We also agree
with Mr Dunlop that in this case the granting of the planning permission could
not be said to have imposed any requirement or condition with regard to any of
the existing structure. Its only effect was to permit the retention of any
elements of the original building that had been retained. That retention was a
matter of choice on the part of the Appellant on grounds of convenience or
economics. The planning permissions did not include any condition or
requirement for the retention of a single façade.
19. Accordingly,
even we had found that no more than a single façade had been retained, the
requirements of note (18) to Group 5 of Schedule 8 VATA would not have been
satisfied in this respect, and consequently the building did not cease to be an
existing building. The works were therefore not within section 35(1A) VATA.
20. We should add
that the question of a refund of VAT for a DIY housebuilder falls to be
determined on the basis of the statutory provisions that provide that relief.
This cannot be affected by the classification of the building works for other
purposes, including Building Regulations. Nor is it affected by the fact that
the Council made a refund of VAT paid to it in respect of building control
fees. For the reasons we have given, the Appellant is not entitled to a refund
under the DIY Builders and Converters Refund Scheme on the facts of this case.
The hearing having taken place in the absence of the
Appellant, the Appellant has a right to apply for this decision to be set aside
pursuant to Rule 38 of The Tribunal Procedure (First-tier Tribunal) (Tax
Chamber) Rules 2009.
This document contains a summary of the findings of fact
and reasons for the decision. A party wishing to appeal against this decision
must apply within 28 days of the date of release of this decision to the
Tribunal for full written findings and reasons. The parties are referred to
“Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)”
which accompanies and forms part of this decision notice.
ROGER BERNER
TRIBUNAL JUDGE
RELEASE DATE: 6 August 2010
© CROWN COPYRIGHT
2010
