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Cite as: [2004] UKVAT V18822
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Harris & Anor v Customs and Excise [2004] UKVAT V18822 (29 October 2004)
    18822
    VALUE ADDED TAX – refund to persons constructing certain dwellings – residential conversion – separate use or disposal of the dwelling was prohibited by the terms of the statutory planning consent at the time the conversion was completed but permitted later – whether building designed as a dwelling – no – appeal dismissed – VATA 1994 S 35 (1A)(c) and (1D) and Sch 8 Grp 5 Note(2)(c)

    LONDON TRIBUNAL CENTRE

    MR A E AND MRS J M HARRIS Appellants

    - and -

    THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

    Tribunal: DR A N BRICE (Chairman)

    DR MICHAEL JAMES

    Sitting in public in Bristol on 10 September 2004

    Mr A E Harris for both Appellants

    Caroline Neenan of counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

    © CROWN COPYRIGHT 2004

     
    DECISION
    The appeal
  1. Mr A E and Mrs J M Harris (the Appellants) appeal against a decision of Customs and Excise dated 28 June 2002 not to allow a refund of value added tax under section 35 of the Value Added Tax Act 1994 (the 1994 Act). The amount claimed was £30,547.67 and the reason for the refusal was that the separate disposal of the dwelling was prohibited by the terms of a statutory planning consent at the time the building was completed.

    2. The legislation
  2. Section 35(1) of the 1994 Act provides that, where a person carries out works to which the section applies, and tax is chargeable on the supply of goods used by him for the purposes of the works, Customs and Excise shall refund the amount of the tax. Section 35(1A)(c) provides that the works to which the section applies include a residential conversion. Section 35(1D)(a) provides that works constitute a residential conversion to the extent that they consist in the conversion of a non-residential building into a building designed as a dwelling. Section 35(4) provides that the notes to Group 5 of Schedule 8 apply for construing section 35. Note (2)(c) of Group 5 of Schedule 8 provides that a building is designed as a dwelling where the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision.

    3. The issue
  3. The planning permission for the works carried out by the Appellant provided that the new building should only be used ancillary to the main dwelling and not as a separate unit of accommodation. The works were completed on 22 April 2002. On 22 September 2003 the planning permission was amended so as to provide that the new building could be used as a separate unit of accommodation. The Appellants argued that that meant that they should receive a refund. Customs and Excise argued that the condition in Note (2)(c) had to be fulfilled at the time of the completion of the dwelling and the fact that separate disposal was permitted at a later date was not relevant.

  4. Thus the issue for determination in the appeal was whether the condition (that the separate use, or disposal of the dwelling was not prohibited by the term of any covenant, statutory planning consent or similar provision) had to be satisfied at the time of the completion of the building (as argued by Customs and Excise) or could be satisfied at any later time (as argued by the Appellants).

    5. The evidence
  5. A bundle of documents was produced by Customs and Excise. A letter dated 8 September 2004 from Mr Stephen J Berry, an Associate of the Chartered Institute of Building to the Appellants, and a copy of a statement made on 8 September 2004 by Mr Ian Gillanders, a Director of South Combe Construction Limited, were produced by Mr Harris on behalf of the Appellants. Oral evidence was given on behalf of Customs and Excise by Mr David Cawthraw who, at the relevant time, was an Officer of HM Customs and Excise.

    6. The facts
  6. From the evidence before us we find the following facts.

    7. The Appellants and their property.
  7. The Appellants jointly own a property called Bidgoods which is in a village in North Devon. Within the boundaries of the Appellants' property, and before the conversion the subject of this appeal, were: the Appellants' house; some separate outbuildings which included a barn; and another separate building which was used for business purposes. All these buildings were within the curtilage of the house which curtilage also included open spaces for vehicular access and garden land.

  8. Some years ago Mrs Harris's parents became elderly and her mother became unwell. Accordingly, the Appellants wanted to convert the barn on their property for the use of Mrs Harris's parents. In February 2000 they approached the planning department of their local Council and asked if they could discuss the possibility of converting the barn into a dwelling so that Mrs Harris's parents could live in it.

    9. The planning discussions
  9. A planning officer made a site visit to the property and was told that the provision of secure accommodation for Mrs Harris's mother was imperative because of her state of health. The Appellants were then advised that a dependent relative's annexe did not involve separate car parking, accesses and garden areas. They were also advised that if improved access could be provided to the property, and separate car parking and garden areas delineated within the site, there would be no objection in principle to the provision of a separate dwelling.

  10. On 6 March 2000 the planning office wrote to the Appellants indicating that the local planning authority would consider the provision of an annexe in a building within the curtilage of a dwelling by means of the conversion of an outbuilding. New development which comprised infilling or the utilisation of existing buildings would also be considered but access to the property would have to be adequate and any new independent dwelling would need to be provided with an amenity area and car parking amounting to two spaces for each dwelling.

  11. The Appellants thought that planning permission was more likely to be granted speedily if an application were made for a dependant relative's annexe. They also thought that it would be a simple matter to up-grade a permission for an annexe to a permission for new development at a later date because the new building would have car parking spaces and a garden and was planned as an independent dwelling, with independent water and drainage, from the start. They were not told of any problem with value added tax. Accordingly on 14 June 2000 they applied for planning permission for an annexe within the curtilage of their own dwelling house (application No. 29377).

    12. The original planning permission, completion and the refusal of the claim
  12. On 8 August 2000 permission was granted for the "conversion of outbuildings to form annexe". Condition (3) was:

    13. "(3) The development/dependant relative's annexe hereby permitted shall only be used ancillary to the existing dwelling known as Bigoods, Kings Nympton, and shall not be used as a separate unit of accommodation.
    Reason
    The permitted development/dependant relative's annexe is not suitable to be occupied as a separate unit of accommodation."
  13. On 23 April 2002 the District Council issued a certificate that the completion date of the "conversion of outbuilding to dependant relative's annexe" was 22 April 2002.

  14. On 21 June 2002 the Appellants submitted a claim under section 35 in the sum of £30,547.67 to Customs and Excise but this was refused on 28 June 2002 and that refusal is the decision the subject of the appeal.

    15. The amendment of the planning permission
  15. On 14 November 2002 the Appellants applied to the local planning authority to remove condition (3) from the planning permission, at the same time submitting drawing number 026/1. An amended site plan was sent and received on 20 March 2003 and further plans were sent and received on 9 June 2003. The 9 June 2003 plan demonstrated access improvements; indicated a two-car parking area for the barn; indicated a turning area; and indicated separate boundaries for the gardens for the house and the barn.

  16. On 22 September 2003 the local planning authority gave permission for the removal of condition (3) attached to planning consent 29377 subject to four conditions. The first was that the development had to be begun within five years; the second was that the development had to be in accordance with all the plans submitted including that of 9 June 2003; the third was that the site access and visibility splays had to be constructed in accordance with the plans of 9 June 2003; and the fourth was that the existing vehicular access had to be effectively and permanently closed as soon as the new access was capable of use. The permission of 22 September 2003 was thus not retrospective. After 22 September 2003 the property was unrestricted by any occupancy condition.

  17. On 10 October 2003 the Appellants asked Customs and Excise to reconsider their decision to refuse their claim under section 35. Customs and Excise replied on 21 October 2003 refusing the claim on the ground that the separate use restriction was not removed until 22 September 2003 and was effective only from that date. On 13 February 2004 that decision was upheld after a reconsideration and the Appellant appealed on 4 March 2004.

    18. The arguments
  18. For the Appellants Mr Harris argued that the annexe was in fact a separate dwelling from the beginning and nothing was done later to change that. He relied upon the letter from Mr Stephen J Berry who stated that, in his opinion, even though the lifting of the condition was made in a new consent, it would in practice have been retrospective because the works needed to comply with the condition were fulfilled before the building work commenced and the building was in fact used as a separate dwelling from the first day. Mr Harris also relied upon the statement by Mr Gillanders who said that, having carried out the conversion work, he confirmed that the necessary car parking and garden areas were all in existence and that the widening of the access was undertaken prior to the commencement of the building work. Mr Harris stated that all that was required to get the permission of 22 September 2003 was for a plan on which the car parking spaces were delineated.

  19. For Customs and Excise Ms Neenan argued that Note (2)(c) of Schedule 5 of Group 8 provided that a building was designed as a dwelling only if the separate use of the building was not prohibited by the terms of a planning consent. At the time of the completion of the conversion that condition was not fulfilled. The fact that it was fulfilled later, after new plans had been submitted; could not affect the eligibility for the refund. She referred to Alan Roper & Sons Limited v The Commissioners of Customs and Excise (1997) VAT Decision 15260. Ms Neenan also relied upon the statutory context of Note (2)(c) which was part of the definition of the phrase "a building designed as a dwelling". That indicated that any relevant conditions had to be satisfied as the time of the design of the building (that is, at the date of the planning consent) and not later.

    20. Reasons for decision
  20. What we have to decide is whether the condition (that separate use was not prohibited by the term of the planning consent) had to be satisfied at the time of the completion of the building (as argued by Customs and Excise) or could be satisfied at any later time (as argued by the Appellants).

  21. In considering the arguments of the parties we begin by referring to the case referred to by Ms Neenan. Alan Roper concerned the meaning of the words "approved alteration" defined in Note (6) of Group 6 of Schedule 8 of the 1994 Act as "works of alteration … for which consent has been obtained". The issue was whether consent had to be obtained before the works were carried out. The Tribunal held that it did. There were no grounds for reading the words in Note (6) as incorporating retrospective approvals. Further, value added tax was concerned with the making of a supply and for that reason also authority for the carrying out of the works had to be in existence at the time of the supply.

  22. The legislation in that appeal was not the same as the legislation in this. Also, the principle (namely that value added tax is concerned with the making of a supply and for that reason the authority for the carrying out of the works had to be in existence at the time of the supply) is not directly relevant either as this appeal is not concerned with the making of a supply by the Appellant but with the receipt of supplies by the Appellant. Nevertheless we adopt the first of the principles in that appeal as we can see no grounds for a retrospective consent; in any event the consent of 22 September 2003 was not retrospective.

  23. We have been more assisted by Ms Neenan's second argument that the statutory context of Note (2)(c) is that it is part of the definition of the phrase "a building designed as a dwelling". That indicates to us that any relevant conditions have to be satisfied as the time of the design of the building (that is, at the date of the planning consent) and not later. We are confirmed in our view by the fact that, if a later planning consent could fulfil the condition, then in theory a claim for a refund could be made many years after the completion of the building, which could not have been intended.

  24. We have noted the argument of the Appellants that in fact all the necessary works were done at the time of the original planning consent. However, the local planning authority clearly required detailed plans delineating the improved access, the garden areas and the car parking arrangements. This was made clear at the site visit mentioned in paragraph 9 above. At that early stage it was made clear that if these detailed plans were provided there would be no objection in principle to there being a separate dwelling. The importance of the plans again emerged when the application to remove condition (3) was made in November 2002. Plans had to be provided on three occasions, namely on 14 November 2002, 20 March 2003 and 9 June 2003 before condition (3) was removed. This indicates to us that the original planning consent would not have been amended without these additional plans.

    25. Decision
  25. Our decision on the issue for determination in the appeal is that the condition (that the separate use is not prohibited by the term of any planning consent) has to be satisfied at the time of the completion of the building and not at any later time.

  26. The appeal is, therefore, dismissed.

    27. DR A N BRICE
    CHAIRMAN
    RELEASE DATE: 29 October 2004

    LON/2004/0185

  27. 10.04

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