Commissioner's File: CIS/15036/1996
SOCIAL SECURITY ADMINISTRATION ACT 1992
SOCIAL SECURITY CONTRIBUTIONS AND BENEFITS ACT 1992
APPEAL FROM DECISION OF SOCIAL SECURITY APPEAL TRIBUNAL ON A QUESTION OF LAW
DECISION OF THE SOCIAL SECURITY COMMISSIONER
"(g) Charges in respect of any services not specified in sub para (a) to (f) which are not connected with the provision of adequate accommodation."
It does not appear that it is claimed that the relevant costs in this case are caught by that sub paragraph.
So far as is relevant to the case, para 8 of Schedule 3 to the General Regulations provides:-
"(3) In this paragraph "repairs and improvements" means major repairs necessary to maintain the fabric of the dwelling occupied as the house or where the dwelling forms part of a building any part of the building containing that dwelling and any of the following measures undertaken with a view to improving its fitness for occupation -
(h) Provision of heating, including central heating."
Under para 8 interest on loans taken out for this purpose is allowable: under para 9 the capital cost involved is not. This is what all would logically expect. It is appropriate that Income Support should defray costs of a revenue, but not of a capital, nature.
(i) Firstly in a letter dated 21.12.94 (p.25/26) as follows:-
"The current oil-fired boilers are in need of replacement. Two boilers are currently out of action and one has been repaired to give sufficient service throughout the winter months. We are considering replacing the said boilers with a new gas-fired system as per our general report and it is considered this would be very much more cost effective in the long run. It is currently considered that the monies currently being levied on existing sinking fund provisions together with those monies already in hand should be sufficient to cover the anticipated expenditure but we will be in a better position to advise you in the Spring of 1995 when the Consultant Engineer's proposals have been drawn up and costed."
(ii) Then in a letter of 1.11.95 (quoted in para 6 of the claimant's grounds of appeal (43/45):-
"We have undertaken such works" to the boilers "as the existing part had reached the end of its useful life (and was uneconomic to maintain). It is impossible to replace the original boilers with the same level of technology as the original specification of boiler is no longer manufactured. The specification and performance of the new plant and equipment is obviously higher than the original equipment but nevertheless is of the minimal acceptable standard that could be expected to be installed as a replacement of the old boilers. For example, all boilers now have microchip technology. Therefore, it is fair to conclude that we have made no additions to the heating system other than the straight replacement of boilers and control equipment which were beyond feasible maintenance and repair. We would also state that none of these works can be classed as capital improvements to the property and are merely complying with the landlord's obligation to maintain the services as specified under the terms of lease."
(i) Are the works described above "major repairs necessary to maintain the fabric" of a block of flats?
(ii) Are the works "provision of heating including central heating" undertaken with a view to improving the fitness of the claimant's flat for occupation?
"2. Para 8 covers repairs to the fabric of the dwelling and also improvements. It was suggested to us that repairs to maintain the fabric covers work on walls, roof and floors so that the replacement boiler cannot fall within that limit. We accept that argument. However, para 8 goes further to include improvements carried out with a view to improving fitness for occupation. The notes in Mesher and Wood to para 8 suggest that this limit must be interpreted broadly - CIS/749/91 and CIS/643/93. We can see no reason for departing from that approach and must therefore consider whether fitness for occupation has increased. Our conclusion is that a new boiler with the attributes described in correspondence before us is better than the previous one so an improvement. The appellant herself has told us that her heating was both more effective and more consistent. They find that the boilers are within para 3(3)(k) so deductible under 9(2). The appeal is dismissed."
"Maintain and renew when required the central heating and hot water apparatus and all ancillary equipment thereto other than that contained in the demised premises."
The claimant is under an obligation therefore to pay 0.6875% of the relevant cost. It is plain to me that the replacement of the worn out boilers in this case clearly comes within the ambit of this covenant. It also seems to me that it would, within the dictum of Denning LJ in Morcom v. Campbell-Johnson 1956 1QB 106, constitute, for the purposes of the Lessor's comment, a repair, and not an improvement. The relevant part of that judgment has been quoted by the claimant in para 5 of the representative's observations:-
"If the work which is done is the provision of something new for the benefit of the occupier, that is, properly speaking an improvement; but if it is only the replacement of something already there and which had become dilapidated or worn out, then, albeit that it is a replacement by its modern equivalent, it comes within the category of repairs not improvement."
Although the replacement boilers are updated it appears from the agent's letters from which I have quoted above that for this purpose they are not, at any rate, "improvements".
(i) The general tenor, as I have pointed out, is that income support is intended to meet only costs of a revenue nature and not of a capital nature. I would regard the installation of a new boiler, albeit a replacement, as a capital expense, subject to depreciation nevertheless in the ordinary way. Moreover, if the same was in context of a commercial operation, it seems to me that, as a general principle, the cost of installation would not be deductible for tax purposes, although doubtless qualifying for capital allowances. This is because the expenditure was of a capital nature.
(ii) I would have thought that, the installation of the new boiler would be undertaken with a view to improving the fitness of the flat for occupation. On the hypothesis I have postulated, the fact that the landlord may be under an obligation to renew would be immaterial. The provision of a reliable system which had been worn out is an improvement to the fitness of the flat for occupation.
(iii) In R(IS)3/91, a tenant's cost of roof repairs was a service charge but that case was decided before sub-para 2(c) and para 9 was added and, in the commentary in Bonner. (1995 Edition), it is unequivocally stated that the exclusion in sub-para (c) would now apply, with the effect of excluding the roof repairs from the he ambit of "service charges". There cannot be any difference in principle for present purposes between the cost of roof repairs and the cost of renewal of the boilers.
(Signed) J M Henty
(Date) 8 April 1998