British
and Irish Legal Information Institute
Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Adams v Customs and Excise [2003] UKVAT V18054 (19 March 2003)
URL: http://www.bailii.org/uk/cases/UKVAT/2003/V18054.html
Cite as: [2003] UKVAT V18054
[New search] [Printable RTF version] [Help]
- The Appellant, Mrs Amanda Wynne Adams, lives in a house known as "Beaulieu", in Kelston Road, Bath. The main house is Georgian, and was built in or about the mid to late 18th Century. A two-storey extension was added in the late 19th Century. The whole house with the extension is a listed building of Grade II. The house was built on the side of a hill, and at the time when it was built it was necessary to build two retaining walls, to prevent slipping of the land itself down the hill and movement of the house. Those two retaining walls are still there. In 2001 it became necessary to construct a new upper retaining wall and to instal new drainage and a septic tank. Underpinning work was also carried out. The Appellant, through her architect, Mr Peter Dlugiewicz, submitted to the Commissioners that the works should be zero-rated in accordance with Item 2 of Group 6 of Schedule 8 to the Value Added Tax Act 1994 ("the 1994 Act"). The Commissioners' decision, in a letter dated 12 March 2002, was that the works were standard-rated, except for the underpinning. Mrs Wynne Adams appeals against that decision.
- Group 6 of Schedule 8 to the 1994 Act deals with zero rating in respect of protected buildings, and provides, so far as is relevant to this appeal as follows:
- . . .
- The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity.
- The supply of building materials to a person to whom the supplier is supplying services within item 2 of this Group which include the incorporation of the materials into the building (or its site) in question.
- There was no significant dispute as to the facts in this appeal. In the first place, it was common ground between the parties that the house was a "protected building" for the purposes of Schedule 8. The Commissioners also accepted that the protected building included any objects and structures fixed to the building and any objects and structures within the curtilage of the building which have formed part of the land since before 1 July 1948. There was some dispute as to what was and what was not within the curtilage of the building. It was also accepted by the Commissioners that the underpinning works were properly zero rated.
- In May 2001 a structural engineer's report on the movement of the land at Beaulieu was obtained. The report is summarised as follows:
- The works hereby approved shall be begun before the expiration of five years from the date of this consent.
- All works of making good shall match the adjacent original work in all respects.
- The written justification briefly describes the building and the nature of the earth movement, and summarises the required works as follows:
- There was an exchange of correspondence with the local authority relating to drainage, and the position was confirmed by the Council in a letter dated 10 May 2002:
- Drawing 1055/01, referred to in the listed building consent, is the proposed site plan. It shews the outline of the house, and all the existing retaining walls, one of which is shewn as having been removed. It also shews the line of piling below the house, and the new retaining wall immediately below that. It does not shew the drainage. Drawing 3098/103A, referred to in the Council's letter of 10 May 2002, shews the strata of earth and stone beneath the house, and a section of the piled retaining wall and the lower retaining wall, with the drainage and septic tank. Mr Dlugiewicz said that the upper retaining wall had had to remain until the piling had been completed. The piles were about 12 metres deep, extending right down into the mudstone, for the full length of the 40-metres wall (see photographs 6 and 7) and had a concrete pile cap on top. Drawing 3098/103D shews the sections at A-A and B-B marked on drawing 1055/01, with the new piled retaining wall and the lower retaining wall, the drainage and septic tank, and the rock anchors, each about 10 metres long, which anchor the new retaining wall into the ground and extend back underground for nearly the whole width of the house. They are steel rods, which are drilled into the rock, and there were 110 of them. They were guaranteed for 90 years, but would probably last up to 200 years. The upper retaining wall had not been founded on good ground, but on landslip material. The engineers had originally advised that the lower retaining wall should be built in the same place. It was of such thickness that the landslip was not rotating in the same way or to the same extent as the upper retaining wall. But that was not done. The upper retaining wall is very thin, and fairly poorly constructed, and had been pushed over by movement. The landslip material goes right up to the foundations of the house, and it was possible that if it moved downhill, or as it did so, the house would fall down. For that reason it was decided to construct a new wall closer to the house.
- Ten photographs were produced. The first, taken in 1898, shews the original retaining wall, taken from below, with the house appearing over the top. The second, taken in 2001, clearly shews the two retaining walls to the south of the house. The lower retaining wall has been left, and the upper wall was replaced by the piled wall which was set closer to the house than the original upper wall. Photograph 3 shews the damage caused by movement to the end of the upper retaining wall. Photographs 4 and 5 shew the south side of the house and the tension crack in the terrace very close to it. Photographs 6 and 7 shew the new retaining wall in the course of construction, before the stone facing was added. The massive piles are visible, as are the holes in the pile caps through which the rock anchors were inserted. Photograph 8 shews the new retaining wall completed, and the paved terrace between it and the house, and 9 and 10 shew the paved terrace extending back to reach the house.
- In a letter dated 25 October 2001 Mr Dlugiewicz asked the Commissioners to confirm that the works comprising the construction of the new retaining wall, and the underpinning of the Victorian extension should be zero rated, since the National Advice Centre had advised that such works were regarded as alterations. The Commissioners replied in a letter dated 21 November 2001, saying:
- 8 What can be zero-rated in the course of an approved alteration?
- the services you supply in carrying out an approved alteration to a protected dwelling....
- . . .
- the building materials you use in connection with your alteration work....
- Mr Dlugiewicz replied on 26 November 2001, referring to a discussion with Mr Jonathan Mitchell, a Customs officer. The letter continued:
- The main works to the property entail the construction of a piled retaining wall, to be faced in stonework. This work is not the repair of an existing wall but the construction of a new, necessary to relieve the imminent danger of land slippage which would likely result in the loss [of] this listed property. This danger is spelt out in the structural engineer's report a copy of which we would be pleased to provide.
- The retaining wall, referred to above, is not within the grounds of the property but is linked to it by a basement area which, we are assured by both the owner and the adjacent neighbour who is a building contractor, exists beneath the external terrace. The rooms here are not currently available for us to view due to the dangerous state of the existing retaining wall."
- The drainage to the house is being completely rebuilt and remodelled at the front of the house as the existing has broken and collapsed. This new drainage will be designed to take account of the new retaining wall and current environmental regulations and will include new pipework, new inspection chambers and a new septic tank.
- The Commissioners reply, from Mrs Jones of the Business Advice Centre in Cardiff, after having considered the documents supplied, was dated 21 January 2002. The letter said,
- On 22 January 2002, before a definite answer had been received from the Commissioners relating to the retaining wall, Mr Dlugiewicz wrote again to Mrs Jones raising two further points:
- In paragraph six of your letter you refer to a Tribunal in which the Chairman found a drainage system was part of the fabric (structure) of a building. This being so this particular retaining wall, the absence of which would result in the physical collapse of the building, must likewise be seen as fabric (structure). Indeed, even the drainage itself could not be installed and function correctly in such ground conditions without the presence of the wall."
- Mrs Jones replied in a letter dated 12 March 2002, giving the views of that Section, which included the following:
- In cross-examination, Mr Dlugiewicz was asked to go into more detail. He agreed that the planning decision did not mention drainage or underpinning, nor was there a mention of drainage in the justification. The section B-B in drawing 103A shewed the new drainage manhole. The pipe went through the piles and was hidden behind the stonework. The new septic tank was not in the same position as the old, but in a similar position. The sinking of the piles would have smashed the old drainage.
- The drainage had to fulfil two functions: rainwater drainage and foul drainage. Rainwater had to be carried away from the roof of the house or from the ground. There were downpipes from the roof to the ground. From that point on there were entirely new drains leading to the new soakaway. Foul drainage pipes had been broken by ground movement and were incapable of repair. They were renewed from the point where they discharged from the wall of the house, that was, from the point where they penetrated the foundations. Then the route of the old pipes had not been exactly followed, because it was desired to instal a more efficient and cost-effective system. By and large the old route was followed, because there was no choice, there being nowhere else the pipes could have gone. The Council's letter of 10 May 2002 referred only to the pipe going down inside the new retaining wall, which was an integral part of the system. The Council did not know about the rest of the drainage, because it was all discussed orally: there had been a site meeting with Anita Simms before the planning application had gone in, and the whole system was discussed then. The letter did not refer only to the wall. The written justification was asked for. The drainage was an integral part of the whole.
- The effect of the rock anchors, Mr Dlugiewicz said, was the same as that of underpinning. The Victorian extension had been underpinned with small concrete piles. The wall piles were very long. The strongest movement will always be at the top, to that the piles will tend to move, and the same situation could arise. The rock anchors are inserted to stop that. They underpin the house and stop the piles moving; they hold the wall which underpins the house and holds the land in place, and that land is the land on which the house is built.
- Mr Dlugiewicz added, that if you repair something, the object repaired must still exist. For instance, replacement of tiles on a roof is a repair of that roof. But here there was nothing left of the original wall, and therefore no repair.
- Miss Shaw, for the Commissioners, produced a helpful skeleton argument. She confirmed that the underpinning of the Victorian extension was accepted as being zero-rated, and the appeal was concerned, therefore, with the retaining wall and the drainage. She acknowledged that the house was a "protected building" for the purposes of Item 2 of Group 6 of Schedule 8. It was also accepted by the Commissioners that the protected building included any objects and structures fixed to the building and any objects and structures within the curtilage of the building which have formed part of the land since 1 July 1948. Miss Shaw contended that the word "curtilage" meant, for the purposes of this appeal, "an area attached to a dwelling-house and forming one enclosure with it".
- The legislation provided that in order to qualify for relief under Item 2 the works had to be carried out in the course of an approved alteration to the protected building. That entailed three things: first, the works must be approved under the Planning Acts; secondly, the works must amount to an alteration of the protected building; and thirdly, that the works must not constitute works of repair or maintenance. Since the relief was a privilege, an exception from ordinary liability, the legislation should be applied restrictively.
- As to whether the works were approved, the Council's decision described the works as "demolition of existing retaining wall and construction of new retaining wall". Therefore, the works relating to the retaining wall were approved, but not the drainage works. Miss Shaw referred to Note (9) to Group 6, which permits an apportionment to determine the extent to which the supply was to be treated as falling within Item 2. But the consent could only apply to the retaining wall, since approval had not been sought for the drainage works. The discussion of the drainage at a pre-application site meeting was not enough for approval. It had not been asked for, nor obtained, nor was it required. The drainage work was therefore outwith the provisions for zero rating.
- Miss Shaw submitted that an alteration to a building involved carrying out work on the fabric of the building, and was such as to cause change to the building, causing the building to become in some way different from what it had been before the works. In this case, even if the works amounted to an alteration, they were not an alteration of the protected building, but simply an alteration to the anticipated natural consequences of landslip.
- In Zielinski Baker, at paragraph 54, Rix LJ said that the preferred approach to the construction of Item 2 was the holistic approach. Miss Shaw derived from that the need to ensure that the building in question was the main building not a secondary building, and contended that the alteration must be to the main building, namely the house. In The Vicar and Parochial Church Council of St Petroc Minor v Customs and Excise Commissioners (1999) (Decision No 16450), the work to be carried out in order to provide a dry area to prevent water penetration through the wall of the church was described thus:
- The letter of 10 May 2002 from the Council did deal with drainage, but only to the extent that the drainage appeared outside the new retaining wall. All the letter did was to say that it would be preferable if the piping went inside and was not visible outside. That letter was not sufficient to justify saying that it applies the listed building consent to the drainage. It was the Commissioners' contention that the replacement of the foul drainage, following, as is does, the same route as the old drains to a septic tank in more or less the same place, is repair and maintenance. The rainwater soakaways were new structures and had formed no part of the building before, and cannot therefore be part of the protected building. The words "repair and maintenance" should be given their ordinary meanings: making good something which has fallen into disrepair. That is what happened, even though the original wall had to be demolished and a new one constructed. A replacement does not exclude repair. It was a matter of fact and degree. The Tribunal should form a picture of the property before and after, and ascertain whether there had been repair and maintenance or alteration. Work carried out to remedy the position after the original wall became unsuitable and was no longer doing its job was not an alteration. The scale of the works, and the fact that the wall was moved, were irrelevant.
- The concept of alteration requires that there should be some sort of change to the building. It was conceded that the retaining wall was within the curtilage of the building. But the wall did not act as a means of underpinning the house, nor was it holding up the land under the house and thus acting as a foundation. The wall acts only as an alteration to anticipated natural consequences of landslip. The fact that the further effect is that the foundation remains intact does not make the wall part of the foundations. There is no contact between the wall and the house, nor can it be said that the wall is connected to the foundation by reason of its function.
- Mr Dlugiewicz submitted that the decision in St Petroc was not against the Appellant's case, since the works in that case were clearly works of repair; they were incidental to the removal of damp. Damp would not cause a building to fall down, whereas the works in the present case were intended to prevent exactly that. In Sutton, the expression "keeping up" referred to the keeping of the building in proper repair, not to keeping the building standing. That case was distinct from the present. Mr Dlugiewicz relied upon passages from ACT Construction Ltd v Customs and Excise Commissioners [1982] STC 25, which were cited in the Sutton decision, and in particular a passage from the speech of Brandon LJ, in the Court of Appeal, relating to underpinning, involving "a radical and fundamental alteration to the structure of the building as it had been before". In the present case there was not the same sort of retaining wall after the works as there had been before. He relied also on a passage in Sutton at page 358j in which Slade LJ pointed out that the roofs of the buildings concerned gave rise to no immediate risk of damage to the structure of the buildings. The work in Sutton, he submitted, was clearly work of repair or maintenance.
- Mr Dlugiewicz adopted the concept of the holistic approach advocated by Rix LJ in Zielinski Baker. He contended that the wall was part of the listed building. Alteration, he submitted, involved change. Where what was originally there no longer existed, that was not merely repair. The soakaways were not wholly new, but it was impossible to tell what had been there before. The soakaways were connected back by the pipes to the building. The septic tank was about 9 metres from the original position. The route of the pipe to it was essentially, but not exactly, the same as before.
- In order to qualify for zero rating, supplies of services and building materials must be made in the course of an approved alteration of a protected building. It is not in dispute that the Appellant's house is a protected building. Therefore, we proceed to look to see if the works were an approved alteration. That is defined in Note (6), which specifically requires that consent must have been obtained under the Planning (Listed Buildings and Conservation Areas) Act 1990 ("the 1990 Act"). The consent obtained (see paragraph 4 above) was "to carry out the above development in accordance with the application, plans and drawings submitted by you subject to the conditions set out below". The "above development" was the "Demolition of existing retaining wall and construction of new retaining wall". It is therefore clear that consent had been obtained for the construction of the new retaining wall in accordance with the plans and drawings submitted. (For ease of reference and clarity of illustration we append as an appendix copies of drawings (or parts of drawings) 1055/01, 103A and 103D. These drawings shew the piles, the new retaining wall, the rock anchors, and the drainage, amongst other features mentioned in paragraphs 7 and 8 above.)
- It is clear from the planning requirement and consent that within the listed building context, at least, the house and the retaining wall are together considered to be the protected building, or the retaining wall is considered to be sufficiently closely linked to the house as to form part of the building. That is consistent with the provisions of section 1(5)(b) of the 1990 Act, that
- The issues to be determined by us, therefore, are, first, whether what was done was an approved alteration. That is in two parts: the work on the retaining wall, and the work on the drainage. We have to decide in each case whether the work was an alteration, or whether it was repair or maintenance. If we conclude that in either case it was an alteration, then we must consider whether that alteration was an approved alteration.
- The drawings appended hereto illustrate precisely what work was carried out. The old retaining wall, which was collapsing, was completely demolished, and replaced with the new retaining wall some 2.5 metres nearer the house. The photographs (which we have not appended to this decision) also shew clearly the close proximity of the new wall to the house, as well as the tension cracks caused by the movement which necessitated the works. The wall is anchored by piles extending 12 metres deep, is further anchored by the rock anchors extending 10 metres diagonally under the house into the mudstone. The works were on a massive scale, and were for the purpose of keeping the house standing and the steep bank from sliding farther. The external aspect of the new wall is different from that of the old wall.
- The Commissioners say that that work was repair or maintenance. If that is so, what was repaired or maintained? Clearly not the old retaining wall, for that was wholly demolished. There is nothing else that could have been, except the house and those features intended to prevent the house sliding down the hill, all taken together. That they should be taken together is already established by reference to section 1(5)(b) of the 1990 Act. But is what was done repair or maintenance? It was held in ACT Construction Ltd v Customs and Excise Commissioners [1982] STC 25 HL that those two words encompassed a single concept, and were not to be considered separately or alternatively. In our view, looking at the facts presented to us, this went much further than repair or maintenance. A complete retaining wall was demolished and removed. A new one, considerably larger, supported by massive piles, substantially nearer the house, and finally anchored with the rock anchors, was built in its stead. This was a completely new structure, and was in many ways different from the old wall. In our view, such a new structure as that cannot fall into the category of repair or maintenance, nor could it be either one of those. Without more, we have come to what we consider to be the only possible conclusion, that the work was an alteration. It was an alteration of the whole concept of the house with its earthworks. We also agree with Mr Dlugiewicz's contention, that if you repair or maintain a thing, that thing must still exist. Further, we also find that the effect of the piles, the wall, and the rock anchors was very similar to, if not the same as, underpinning of the house and the bank upon which it stands.
- We turn, then, to the decisions and authorities cited to us, to see whether they confirm our view or shew it to be wrong. The most recent was Zielinski Baker. As we have already said, we have borne in mind the "holistic approach" preferred by Rix LJ, and we respectfully adopt it. Factually, that case was concerned with the construction of an outbuilding comprising games facilities and a swimming pool within the curtilage of a listed building. In paragraph 52 on page 844h, Rix LJ said,
- St Petroc was quite a different case. There, an existing dry area was extended in the manner described in paragraph 22 above. The Tribunal's decisive words were:
- Sutton Housing Trust was also a very different case, being concerned with the replacement of roofing tiles. At [1984] STC 352, 359d, Slade LJ said,
- In our judgment, nothing in those decisions is inconsistent with our finding. Indeed, we are encouraged in that finding by the passage cited from Brandon LJ in ACT Construction, especially in view of our conclusion that the new retaining wall with the piles and rock anchors effected an underpinning of the house and the bank. We conclude, therefore, that the construction of the new retaining wall was an approved alteration to the protected building.
- Walsingham was a case concerned with drainage. There were two drainage systems, one from the principal building, which was a protected building for the purposes of Item 2 of Group 8A of Schedule 5 to the 1983 Act, which is now enacted in Item 2 of Group 6 of Schedule 8 to the 1994 Act. The other drainage system was from a group of cottages. The drains in each case had to run some distance before reaching the stream into which they eventually discharged. The Tribunal said, at page 11,
- In the present appeal, the drainage was not the subject of a separate listed building or planning consent. As we understand the matter, there was no need for a separate application. According to the evidence, which we accept, the matter of the drainage was discussed between Mr Dlugiewicz and Anita Simms, and certain stipulations were made in her letter of 10 May 2002. The listed building consent was expressed (see paragraph 4 above) to cover "the application, plans and drawings" submitted for that purpose. The three drawings which were stamped "Permitted" were those numbered 1055/01, 103A, and 104A. Of those, 103A includes the drainage membrane and the external drainage. (The drainage is shewn in more detail in drawing 103D, though that drawing was not specifically marked as permitted.) That being the case, it is clear that listed building consent was given for the drainage as shewn in drawing 103A. We also take the view following the example of Walsingham, that the whole drainage system was an integral part of the house. For those reasons, we have come to the conclusion that the drainage from outside the house to the perforated land drain beyond the septic tank also falls within Item 2, and the supplies of goods and services in connexion with it should also be zero rated.
- We therefore conclude that the construction of the new retaining wall, and the drainage shewn in drawing 103A, fall to be zero rated, but that the remainder of the drainage (if any) does not. As a result, there will be an apportionment in accordance with Note (9), and we leave that to the parties to determine.
- The appeal therefore succeeds to the extent indicated above.
- Neither party made any application for the costs of this appeal. Therefore, if either party wishes to make an application for costs, we give liberty to each party to make such an application. Our preliminary view is that, if the Appellant were to make an application for costs, she should have some part of her costs corresponding to the amount of time taken in respect of the parts of the appeal in which she succeeded.
- We also give liberty to each party to apply on the question of the apportionment under Note (9), in default of agreement on that matter.
- Any application under either of paragraphs 40 and 41 above should be made not later than two calendar months after the date of release of this decision.
ZERO RATING Building works Protected building a dwelling Approved alteration Demolition of old retaining wall and construction of new to prevent landslip Construction of new drainage system Whether an "approved alteration" Whether "repair or maintenance" VATA 1994, Sch 8, Gp 6, Item 2, Note (6) Appeal allowed in part
LONDON TRIBUNAL CENTRE
MRS AMANDA WYNNE ADAMS Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: MR ANGUS NICOL (Chairman)
MISS SHEILA WONG CHONG FRICS
Sitting in public in London on 22 November 2002
Mr Peter Dlugiewicz, architect, of Bennett Dlugiewicz Date, for the Appellant
Miss Nicola Shaw, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents
© CROWN COPYRIGHT 2003
DECISION
The legislation
"GROUP 6 - PROTECTED BUILDINGS
Item No
NOTES
. . .
(6) 'Approved alteration' means
(a) . . .
(b) . . .
(c) in any other case, works of alteration which may not ... be carried out unless authorised under, or under any provision of
(i) Part I of the Planning (Listed Buildings and Conservation Areas) Act 1990
. . .
and for which ... consent has been obtained under any provision of that part,
but does not include any works of repair or maintenance, or any incidental alteration to the fabric of a building which results from the carrying out of repairs, or maintenance work.
(9) Where a service is supplied in part in relation to an approved alteration of a building, and in part for other purposes, an apportionment may be made to determine the extent to which the supply is to be treated as falling within item 2."
The facts
"This report brings together Geological and Structural investigations into structural movement at 277 Kelston Road in Bath. The report concludes that movements in the driveway, northerly retaining walls and rotation of the upper retaining wall are probably due to local structural inadequacies. However movement of the house foundations is due to long term creep of the overlying land slip material and that failure of a slip plane to the south of the building would affect all structures to the south of the site, including the house itself. Outline suggestions for remedial work are put forward."
An application for listed building consent was made to Bath and North East Somerset Council, who gave their consent on 26 September 2001. The described the proposal as "Demolition of existing retaining wall and construction of new retaining wall." The consent was in the following terms and with the following conditions:
"CONSENT is hereby granted to carry out the above development in accordance with the application, plans and drawings submitted by you subject to the conditions set out below:
Reason: To comply with section 18 of the Planning (Listed Buildings and Conservation Areas) Act 1990.
Reason: To safeguard the special architectural and historic interest of this statutorily listed buildings
. . .
FOOTNOTE: This consent relates to the written justification statement, structural report, site location plan, photographs and drawing nos 1055/01, 02, 100, 103 Rev A and 104 Rev A date stamped 20 August 2001."
"Urgent works of stabilisation are therefore required. These will entail the insertion of a new bored pile wall and its facing with reclaimed rubble stone work to match the original. This wall will be set back approximately 2.5m from the original wall towards the house. Because of the very unstable and dangerous state of the existing wall it is not safe to demolish and rebuild it in the exact same position. Were this to be attempted it is considered that the house itself could be fatally undermined.
In carrying out these works large items of plant will need to be brought onto the site. For this to be done safely additional piling work is required to the top end of the drive which is also badly cracked and moving. These piles will again be faced with salvaged rubble stonework and the wall will rise no higher than the existing. We are effectively therefore, replacing this on a like-for-like basis.
During the exploratory geotechnical survey it was discovered that the Victorian extension to the house is devoid of foundations capable of withstanding any movement in the ground which may occur during the works. The external walls will accordingly be underpinned."
That justification is the basis upon which consent was granted, and also summarises the generality of the work to be done
"Your drawing number 3098/103 showed a section illustrating that drainage pipes would be taken underground to discharge at the base of the retaining wall rather than by a pipe running down the exposed face of the wall.
The Council is able to confirm that if the drains were to be exposed on the retaining wall, it is the Council's opinion that this would have an adverse effect upon the building as one of special architectural or historic interest. However, by taking the drains to the lower level as shown on the above drawing, there would be no adverse effect upon the listed building apart from where the drain discharges through the wall for which Listed Building Consent has been granted."
Mr Dlugiewicz said that speaking on the telephone to Anita Simms, the writer of that letter, she had said that the consent referred to was consent to the discharge through the wall, not simply to the building of that wall. Rainwater was always discharged down the hill. Soakaways were means of doing the same thing, but were so placed that the water cannot erode the hill. The wall performs a fundamental role in the standing of the property: without it the building would not stand. The original wall had probably been there since the building of the house.
"Please find enclosed Public Notice 708 Building and Construction. As you can see, any work that is carried out for reasons of renovation or repair is standard rated, even if it results in an alteration to the fabric of the building. Therefore the work described in your letter, which is being carried out for reasons of repair, will attract VAT at 17.5%."
Public Notice 708, which lists the relevant legislation but does not put it into the context of the rules set out in the Notice, includes the following, in Part 8, which is headed "Approved alterations to protected buildings":
"8.1 General
Work to an existing building is generally standard-rated but there are some exceptions. One of these is approved alterations to protected buildings. These works can be zero-rated under certain conditions. The basic principles of this relief are:
(a) The work must be to a protected building as defined in VAT law and to the fabric of such a building (see (g) below).
(b) The work must both require and be granted listed building consent by the proper authority....
. . .
(d) The work, even if approved as in (b) above, must not be works of repair or maintenance.
. . .
(f) Mixed work may be apportioned between the qualifying zero-rated alterations and the standard-rated elements.
(g) 'Fabric' has its ordinary dictionary definition, that is - a structure; a frame; the basic structure of a building. Therefore the fabric of the building includes its walls, roofs, internal surfaces, floors, stairs, landings and all its doors and windows.
. . .
Provided you hold evidence that the building is protected and has listed building consent for the work to be undertaken ( ... )you can zero rate:
This may include work which, if in other circumstances, would be standard-rated work of repair or maintenance. For example, replastering to make good the immediate area following the removal of a dividing wall would be zero rated...."
"... in consideration of the fact that the original advice from yourselves contradicts that now being given we wish to ask for a reassessment of the ruling contained within the letter relating to the VAT, the reasons for which we set out below:
Mr Dlugiewicz explained that in using the words "not within the grounds of the property" he meant that the wall was not at some distance from the house but was very close to the house and almost contiguous with it. We accepted that explanation, since it made sense of the words, the retaining wall being very evidently within the grounds.
"3. [Relates to underpinning below the Victorian extension.]
In none of the tasks being undertaken are repairs being carried out. The danger presented to the house by land slippage cannot be remedied by repairs, the existing structures having proved inadequate to resist the pressures generated and being deemed by both geotechnical and structural engineers to be too dangerous to remain."
The letter invited the Commissioners to reconsider their ruling. In January 2002, at the request of the Commissioners, copies of the structural engineer's report and drawings and of the listed building consent, were sent to the Commissioners.
"With regard to the construction of the retaining wall to the south of the house planning legislation defines a listed building as including, amongst other things, any object or structure within the curtilage of a listed building that although not fixed to the building, has been in existence since before 1 July 1948. In other cases boundary walls and railings may even be listed in their own right. Consequently, for either of the proceeding [sic] reasons, boundary walls or railings will often be subject to listed building consent. If alterations to boundary walls and railings are covered by listed building consent, eligibility for zero rating the work is subject to the normal rules. Most works to boundary walls and railings covered by listed building consent will be standard rated, because for VAT purposes walls and railings are not buildings, i.e. dwellings.
Boundary walls or railings linked to a protected building for example keyed into the wall of a protected buildings, are part of that building, and alterations to them may also be zero rated subject to the normal rules.
The underpinning being carried out to the Victorian extension is considered to be an alteration to the fabric of the building therefore it would qualify for relief from VAT.
With regard to the drainage to the house please see the following extract from VAT international guidance which you may find helpful: the Tribunal Chairman in Walsingham College (Yorkshire Properties) Limited (MAN/93/1569), found that a drainage system was part of the fabric (the structure) of a building. This includes any part of the system outside the building itself, up to the point of joining the main drain or sewer. For many large country houses, as they may have no access to main drains or sewers, this will also include their own means of disposal of sewage e.g. settling tanks, percolating filters and associated pipework. Consequently, if a drainage system is to be altered, then subject to the normal rules these works may be zero rated.
Additionally, if work to a drainage system is carried out as a direct consequence of an 'approved alteration' being carried out to a 'protected building', then the work would be zero rated (subject to the normal rules)...."
The letter concludes by mentioning some other matters concerning drainage, and the services which may be zero rated, and sets out the conditions for zero rating.
"1. In our letter of 15th January 2002, we sent you a copy of drawing number 3098/103. This did not show the rock anchors which are being installed. These tie the new retaining wall back into the rock beneath the house and acts in structural terms to under pin the house. As such we believe we have a strong argument that these works, in both their nature and form, function the same way as conventional underpinning.
That letter was referred to the Commissioners' Construction Policy Section for guidance. Mr Dlugiewicz explained that part of the works required complete replacement of the drainage. Because of land movement, the drainage was broken and did not function, and therefore poured water out thereby exacerbating the problem. There was now nothing left of the original wall and drainage; since it had been completely replaced there had been no repair or replacement.
"Retaining Wall
. . .
Demolishing the old wall and constructing a new one nearer to the house does not affect the fabric of the house itself. On this basis the provision of the new wall does not amount to an alteration to a protected building because the house itself remains untouched by the construction of the new wall. The new wall differs from the original because circumstances demanded a more effective and efficient retaining wall and the alterations to bring this about are incidental to the overall work of repair or maintenance. Works carried out to the retaining wall do not qualify for relief from VAT.
Drainage Works
Policy has also commented on the drainage works carried out to the property.
They have observed that the existing drainage in the front of the house has broken and collapsed. The replacement pipe by and large follows the same route as the originals, and they should be standard-rated as repair and maintenance. The new septic tank and distribution pipework running out from the tank may qualify for zero-rating subject to the normal rules, one of the conditions being that the work must both need and require listed building consent."
It appeared to us that the word "require" in the last sentence should read "receive". The letter continued:
"Separate systems on the east and west side of the house take surface water away from the building and discharge into pipework that function as a soakaway. Those systems appear to replace in part pipework that has failed and to that extent is repair and maintenance. A matter of concern is how those systems alter the fabric of the listed building or even that they are fixed to it. A further doubt is whether they need listed building consent since if they are not fixed to the house, they would be new objects or structure within the curtilage and not considered to be part of the listed building in planning terms."
Based on the information provided by Policy, until evidence is received that the drainage works both need and require listed building consent, we can not accept that the drainage works qualify for relief from VAT."
The letter mentions the case of Customs and Excise Commissioners v Zielinski Baker and Partners (which was then awaiting being heard in the Court of Appeal; the Court of Appeal decision is now reported at [2002] STC 829). In that case the Commissioners were contending, Mrs Jones said, that the term "listed building" was limited to what is included in the description appearing in the list compiled or approved by the Secretary of State and did not extend to objects or structures treated as part of the building for planning purposes. That letter contained the decision against which the Appellant now appeals, though it suggested that the Appellant might wish to wait for the decision of the Court of Appeal in Zielinski Baker before launching an appeal.
The Commissioners' contentions
"The work was intended to deal with the damp entering the vestry wall from the ground outside that wall. That ground sloped downwards towards the wall. The remedy was to dig that ground away from the wall, construct a trench against the wall, thus exposing an area of wall which previously had been below ground, flooring the trench with a concrete foundation with a slight fall to discharge water to either side of the building, and to create a retaining wall against the far side of the trench. There was thus created a trench about a metre deep and about 60 cm wide, the bottom of the trench being a concrete foundation which toughed the now exposed wall at one side, and which provided a foundation for the retaining wall on the other."
Miss Shaw referred to the end of the decision where the Tribunal found that there was little that could be qualified as work on the fabric of the building, and that the work carried out was essentially that of maintaining the building by the creation of the dry area. Miss Shaw contended that the work in the present case was similar, and was essentially maintenance. Customs and Excise Commissioners v Sutton Housing Trust [1984] STC 352 was a case in which roofing tiles that had deteriorated or were of an obsolete type were replaced. The Court of Appeal decided that this was repair or maintenance, and Browne-Wilkinson LJ held at page 357j that
"work undertaken on an existing structure of a building in the ordinary course of managing property for the purpose of keeping up the building without improvement can only properly be described as work of 'repair or maintenance' of the building."
Miss Shaw relied upon that as shewing where the distinction lay between alteration on the one hand and repair or maintenance on the other, and contended that the present case fell within the repair or maintenance side. Miss Shaw enjoined extreme caution upon us in looking at the Tribunal decision in Walsingham College (Yorkshire Properties) Ltd v Customs and Excise Commissioners (1995) (Decision No 13223), especially in the light of Zielinski Baker, which, she contended, had overruled it.
The Appellant's contentions
Conclusions
"...any object or structure within the curtilage of the building which, although not fixed to the building, forms part of the land and has done so since before 1 July 1948, shall be treated as part of the building."
We pause to mention that the expression "fabric of the building" appears only in Note (6) to Group 6, and appears to be used only in connexion with incidental alteration resulting from the carrying out of repairs. Apparently, therefore, it is not necessary for the approved alteration to be carried out to the fabric of the building, except only in so far as that expression is extended in accordance with section 1(5)(b) of the 1990 Act.
The retaining wall
"Group 6 is obviously designed, by the limited support there given in the way of zero rating, to encourage the use of listed buildings and scheduled monuments as dwellings. Their repair and maintenance cannot be zero rated (see Note (6)), but approved alterations to them may be. Such alterations are the more costly, because they have to be done in approved ways, to blend into the existing buildings. Limited support is therefore given to maintain their use as dwellings and to encourage the preservation of the nation's heritage. The appearance of such buildings are a pleasure to all. I cannot see why Mr Lasok's example [the alteration of an orangery some distance from the house and turned into a cafe for the use of paying visitors], albeit chosen as the most extreme which could come to mind, offends the purpose or rationale of Group 6 in the case of protected buildings as there defined."
And in paragraph 54 his Lordship continued:
"The concept of 'an approved alteration of a protected building' supports the view that the building with which the court is concerned is the main building, not the secondary building. So does Note (10), which is otherwise turned into a nonsense. The items and notes under Group 6 are careful to deal expressly with all or at any rate most of the essential questions which would clearly arise for the reader. The concept of a protected building is defined. The concept of substantial reconstruction (see item 1) is defined in Note (4). An approved alteration is defined. Mere repair and maintenance is put on one side. Can there be apportionment where services are supplied in part for an approved alteration and in part for other purposes? Yes, see Note (9). A definition of listed buildings is adopted which renders separate outbuildings part of the listed buildings themselves.
The latter was the passage referred to by Miss Shaw. But whether the definition of protected building was to be applied to the "outbuilding" step by step, as the Commissioners had there contended, was not the issue in the present case. Those two passages, however, shew how the holistic approach is to be applied.
"The Tribunal finds that there was little in the present case which can be qualified as 'work on the fabric of the building'. In any event the work which was carried out was the work of maintaining the building by the creation of a dry area. The Tribunal does not go so far as to say that the work done is 'so slight or trivial as to attract the application of the de minimis rule' but it does say that it is essentially a work of maintenance of the building and therefore excluded from the zero-rated provisions of Item 2. To the extent that there may be an element of alteration it is incidental, resulting from the carrying out of the maintenance work."
The facts in that case are scarcely comparable with those in the present. There, there was an extension of a "dry area" for the purpose of keeping out damp, the building itself not being in danger of collapse. In the present appeal, the works done were such as to affect the existence of the whole property, and went, as we have already said, a long way beyond repair and maintenance.
"The facts as stated by the Tribunal, even though they may not give very detailed information as to the state of the roofs, in my opinion undeniably show that all of them were, at the date of the works, outworn and in a bad condition, and that the work was done for the purpose of remedying this state of affairs.
The facts of this case are, in my view, clearly distinguishable from those of [ACT Construction Ltd v Customs and Excise Commissioners] where, as Brandon LJ pointed out in the Court of Appeal ([1980] STC 716 at 722) in a passage approved by Lord Roskill in the House of Lords ([1982] STC 25, at 29) the work of underpinning in question was not done to any existing part of the building but was entirely new work and 'involved a radical and fundamental alteration to the structure of the building as it had been before'."
The passage from Brandon LJ's judgment, described by Lord Roskill as "compelling" was as follows:
"In the present case the work done was not done to any existing part of the building; it was entirely new work. It involved a radical and fundamental alteration to the construction of the building as it had been before. It involved an extension of the existing building in a downward direction. Such work in my view is not capable of coming within the expression 'maintenance' in the ordinary and natural meaning of that word."
That was the view taken of underpinning work. But the facts in Sutton Housing Trust were very different from those in the present appeal, and, in our view, a clear illustration of repair and maintenance.
The drainage
"In our judgment the system in the instant case, to the extent that it carries the drainage from the Hall, has been at all times since it was installed and is now an integral part of the Hall. Without the system the Hall could not function properly; without the Hall, the system would be irrelevant. We therefore hold that the system, to the extent aforesaid, is part of the building which is listed as the Hall."
The Tribunal decided that the renewal of the drainage system from the Hall and the treatment plant through which it passed before discharge into the stream fell within Item 2 and were zero-rated. In that case, however, listed building consent and planning consent for those specific works had been obtained. However, the decision is of assistance in the present appeal, in its evidential approach, and the conclusion that the drainage system was an integral part of the Hall.
ANGUS NICOL
CHAIRMAN
RELEASED:
LON/02/340