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Cite as: [2005] UKVAT V19366

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John Dennis Julien Winser v Revenue and Customs [2005] UKVAT V19366 (07 December 2005)

19366

Value added tax – zero-rating – houseboat – first connection of mains water supply to houseboat at private residential mooring – whether zero-rated supply – no – appeal dismissed – Groups 5 and 9, Schedule 8, VATA 1994 – extra-statutory concession Notice 48 para. 3.16

LONDON TRIBUNAL CENTRE

JOHN DENNIS JULIEN WINSER Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: EDWARD SADLER (Chairman)

RACHEL ADAMS FCA ATII

Sitting in public in London on 14 November 2005

The Appellant did not appear and was not represented

Caroline Neenan, counsel, instructed by the Solicitor for the Commissioners for Her Majesty's Revenue and Customs, for the Respondents

Appeal heard in the absence of the Appellant under Rule 26 (2) of the Value Added Tax Tribunals Rules 1986

© CROWN COPYRIGHT 2005

DECISION

The appeal and our decision

This is an appeal by Mr John Denis Julien Winser ("the Appellant") against the determination of The Commissioners for Her Majesty's Revenue and Customs ("the Commissioners") that the Appellant is not entitled to claim that the connection of a mains water supply to his houseboat is a zero-rated supply of services for VAT purposes; the Commissioners determined that, instead, it is a standard-rated supply. The water supply connection was made as a condition of the Appellant receiving local authority planning consent to create a residential mooring for his houseboat, and the Appellant's primary contention is that he has created a new dwelling; that the water supply connection was made in relation to that new dwelling; and that accordingly the services of making that water supply connection should be zero-rated.

The Commissioners contend that the supply in question does not fall within any category of zero-rated supply (nor does it fall within the categories of supply which are exempt from VAT, or subject to the reduced rate of VAT) and that accordingly the supply of services in relation to the water supply connection must be subject to VAT at the standard rate.

The amount of VAT in dispute in this appeal is £248.50.

For the reasons set out below it is our decision that the supply made to the Appellant is a taxable supply on which VAT is payable at the standard rate. We accordingly dismiss the Appellant's appeal.

Hearing the appeal in the absence of the Appellant

In advance of the hearing of the appeal the Appellant informed the London tribunal centre that his personal circumstances made it difficult for him to appear at the hearing and that he was content for the hearing to proceed on the basis of the representations made by him in his correspondence with the Commissioners and the tribunal centre. The Appellant did not appear at the hearing. Copies of all his correspondence were available to us, and in that correspondence the Appellant had set out matters of fact and his arguments clearly and in detail. The Commissioners had sent to the Appellant a copy of the skeleton argument which formed the basis of the case for the Commissioners as put to us on their behalf by Miss Neenan at the hearing, and the Appellant gave us his written comments on that skeleton argument.

We therefore agreed to hear the appeal in the absence of the Appellant under Rule 26(2) of the Value Added Tax Tribunals Rules 1986, taking the Appellant's case to be as set out in his Notice of Appeal dated 3 June 2005 and in the correspondence before and after that Notice of Appeal.

The Appellant has the right, under Rule 26(3) of the Value Added Tax Tribunals Rules, to apply to the tribunal to set aside our decision, provided such application is served at the London tribunal centre within 14 days after the date when our decision is released.

The facts

The Commissioners did not challenge any of the facts as set out by the Appellant. Therefore, on the basis of the Appellant's correspondence we find the relevant facts to be as follows:

(1) In 1991 the Appellant purchased a Dutch barge (constructed in 1889) on which he and his wife have lived since then, using different moorings, none of which has been a residential mooring.

(2) In November 2002 the Appellant applied for and obtained planning consent from Dover District Council for a private residential mooring for the barge at Strand Street, Sandwich in Kent. There had been no residential mooring at that site previously. Since that time the Appellant has resided in the barge at that mooring. For the purposes of this appeal only the Commissioners are prepared to regard the barge, at this residential mooring, as a houseboat for VAT purposes (and so we refer to it subsequently in this decision as a houseboat). The Appellant has paid council tax in relation to his occupation of the houseboat at the residential mooring.

(3) It was a condition of the planning consent for the residential mooring that a mains electricity supply and a mains water supply should be connected to the houseboat. The Appellant arranged for the mains electricity supply to be connected to the houseboat, and the relevant work which was carried out was a zero-rated supply for VAT purposes.

(4) The Appellant also arranged for a contractor to install a mains water supply connection to the houseboat. The exact nature of the work carried out is not clear, but it seems that a fixed pipe supply was made to a store or similar building adjoining the residential mooring, and from there a flexible hose supply was made to the houseboat, which allows for the movement of the houseboat as the mooring is in tidal waters. The cost of the contractor's work in installing the mains water supply was £1,420, and the contractor charged the Appellant VAT at the standard rate, namely £248.50. The Appellant is not registered for VAT purposes.

(5) In February 2005 the Appellant wrote to the Commissioners seeking a declaration that the supply of goods and services comprising the installation of the mains water supply to the houseboat should be treated as a zero-rated supply. Following correspondence between the Appellant and the Commissioners, and a review of the initial decision by the Commissioners, the Commissioners determined in their letter of 19 May 2005 to the Appellant that there was no basis for treating the supply in question as a zero-rated supply. Accordingly they determined that the Appellant was correctly charged VAT on that supply. They accepted that the first connection of gas and electricity to a houseboat may be zero-rated in certain circumstances, but that this is by published concession, and the terms of that concession do not extend to the first connection of a mains water supply to a houseboat.

(6) The Appellant appeals against this determination by the Commissioners.

The arguments of the parties

The Appellant's grounds of appeal, as they appear in his Notice of Appeal and subsequent correspondence, can be summarised as follows:-

(1) Following the grant of planning consent for a private residential mooring for the houseboat in circumstances where no such mooring was previously permitted, the houseboat has in effect become a new dwelling (as evidenced by the Appellant becoming liable to pay council tax);

(2) The work carried out in relation to the mains water supply connection to the houseboat in these circumstances is similar to supplies made in relation to the construction of a new dwelling, and as such should be zero-rated;

(3) If such work comprises a zero-rated supply when carried out in the course of creating a new dwelling on land, then it is discriminatory if identical work is not a zero-rated supply when the new dwelling is a houseboat; and

(4) If the first connection of electricity to a houseboat is, by concession, a zero-rated supply, then the first connection of mains water should be treated in a similar concessionary manner.

The case for the Commissioners was put to us by Miss Neenan at the hearing. She explained that she was required to demonstrate a negative – that the supply in question made to the Appellant did not fall within any of the categories of supply which are zero-rated, or exempt, or taxable at the special reduced rate of 5%, and therefore is standard-rated. She took us in turn to each of the relevant Schedules to the Value Added Tax Act 1994 ("VATA 1994") which specify respectively supplies which are exempt (Schedule 9), or taxable at the reduced rate (Schedule 7A), or zero-rated (Schedule 8). She argued that even if it is accepted that the barge is a houseboat for VAT purposes, and that it could be regarded as becoming a new dwelling by virtue of the residential mooring, the supply comprised by installing the new mains water connection in those circumstances does not come within any of the specified categories of supply in any of those Schedules. It must therefore as a matter of law be treated as a standard-rated supply.

Miss Neenan also argued that there are no grounds for extending the concession which zero-rates the first connection of electricity and gas to a houseboat – that is a concession (the strict legal position would require such supplies to be standard-rated) and the Commissioners are prepared to apply it only upon its stated terms. They have no duty to apply it beyond those terms, for example to other utility supplies such as mains water supply connections.

The reasons for our decision

The scheme of the VAT legislation is clear: VAT must be charged on any supply of goods or services where the supply is a taxable supply made by a taxable person in the course of carrying on his business; a taxable supply is any supply of goods or services other than an exempt supply: section 4 VATA 1994. The contractor engaged by the Appellant to make the mains supply connection to his houseboat was, we must assume, a taxable person who carried out that work in the course of his business. He will have been required to charge the Appellant VAT unless the goods or services were an exempt supply. For a supply to be an exempt supply it must be of a description for the time being specified in Schedule 9 to VATA 1994: section 31 VATA 1994. None of the supplies specified in Schedule 9 relates in any way to the goods and services supplied to the Appellant in the present case. It is clear, therefore, that the contractor made taxable, and not exempt, supplies to the Appellant.

Where supplies are taxable, VAT is charged at the standard rate of 17.5% unless the reduced rate of 5% applies, or unless the supply is zero-rated (that is, the supply is a taxable supply, but no VAT is actually chargeable): section 2 VATA 1994.

For the reduced rate to apply, the supply of goods or services must be of a description for the time being specified in Schedule 7A to VATA 1994: section 29A VATA 1994. Although in part Schedule 7A deals with "utilities" (for example supplies of domestic fuel or power, and the installation of energy-saving materials), it is again the case that none of the supplies specified in Schedule 7A relates in any way to the goods and services supplied to the Appellant by the contractor who installed the mains water supply to the houseboat. It is therefore the case that the taxable supplies made by the contractor to the Appellant were not taxable at the reduced 5% rate.

This brings us to zero-rated supplies – it is, of course, the Appellant's contention that the supplies to him were zero-rated. For a supply of goods or services made by a taxable person (such as the contractor in this case) to be zero-rated, the goods or services (or the nature of the supply) must be of a description specified in Schedule 8 VATA 1994: section 30 VATA 1994. The supplies specified in Schedule 8 are categorised in Groups, and of the fifteen Groups there are three which require examination as being possibly relevant to the Appellant's case: they are Group 2 (Sewerage services and water); Group 9 (Caravans and houseboats); and Group 5 (Construction of buildings, etc).

The supply of water (subject to certain exceptions and conditions, not relevant for this case) is a supply within Group 2 of Schedule 8 VATA 1994, and is therefore zero-rated. This is of no assistance to the Appellant. In his case the supply we are concerned with is not of water, but of the work carried out to connect his houseboat to the water mains. Once that connection is made the water company will supply him with water, and such supply will be zero-rated by virtue of this provision. But the work of excavating trenches, laying pipes, connecting the pipe-line into the mains supply, testing the pipe-line and all the other work of connecting the houseboat to the water mains is not the supply of water.

Group 9 of Schedule 8 VATA 1994 deals specifically with caravans and houseboats. The terms of Group 9 are more complex than perhaps they need to be, because in part they have effect by incorporating other provisions. Item No 2 of Group 9 defines "houseboat" for these purposes (and, as mentioned, the Commissioners are prepared to concede for the purposes of this appeal only that the Appellant's barge is within this definition). Item No 3 of Group 9 is in these terms:

The supply of such services as are described in paragraph 1(1) or 5[(4)] of Schedule 4 in respect of…a houseboat comprised in item 2

The reference to paragraph 5(4) of Schedule 4 VATA 1994 can be disregarded as irrelevant, since it is a reference to business assets being put to private use or made available for non-business use.

The reference to paragraph 1(1) of Schedule 4 VATA 1994 is to "any transfer of the whole property in goods" and to "the transfer of the possession of goods". It appears that the Commissioners apply these provisions so that the sale of a houseboat or the letting of it on hire for towing away to a mooring of the purchaser's choice is a zero-rated supply (see Notice 701/20 – Caravans and Houseboats – at paragraph 7.3). It seems also that where there is such a zero-rated supply of a houseboat and in relation to that supply the supplier of the houseboat charges a one-off fee for connecting the houseboat to main services (including mains water), then that fee will be treated as part of the consideration for the supply of the houseboat, and if the supply of the houseboat itself is zero-rated, then so will be the supply comprised by the connection to the main services (see Notice 701/20 at paragraphs 7.7 and 3.2) (presumably this is so only where on the sale or hiring the supplier of the houseboat owns the mooring or is otherwise in a position to provide the connection to main services).

Arguably this treatment by the Commissioners of main service connections at the time of the sale or other supply of a houseboat is more generous than the actual legislation permits. But in any event what is clear is that the supplies within Group 9 of Schedule 8 VATA 1994 are not relevant to the circumstances of the Appellant's case in this appeal – there is no question here of any sale or other supply of a houseboat, and the connection of the houseboat to the mains water facilities was not a supply made to the Appellant by the vendor or other supplier of the houseboat.

Finally, in relation to zero-rated supplies, we come to Group 5 of Schedule 8 VATA 1994, which is concerned with the construction of buildings. Here we need to consider Items No 2 and 4, the relevant parts of which are as follows:

The supply in the course of the construction of a building designed as a dwelling…of any services related to the construction other than the services of an architect, surveyor or any person acting as a 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 the Group which include the incorporation of the materials into the building (or its site) in question.

The Appellant's contention is that, by reason of obtaining planning consent for a residential mooring, he has created a new dwelling which previously did not exist, and that the connection to the mains water supply (an essential and integral part of creating that new dwelling in these circumstances) is a supply made in relation to the creation of that new dwelling.

It seems clear (and certainly is not disputed by the Commissioners) that if the Appellant were constructing a building as his dwelling house and in the course of so doing engaged a contractor to carry out the necessary work to connect that building to the water mains, then the contractor's work would be within the scope of Group 5 and therefore would be zero-rated. But the Appellant's circumstances are different.

First of all, a houseboat is not a "building". This was decided in the case of Dr John Parkinson v The Commissioners of Customs and Excise (2001) VAT Decision 17257. In that case the appellant incurred work converting a disused Thames lighter into a houseboat for which he obtained planning permission to moor on the south bank of the Thames. He arranged for the work to be carried out and claimed that he was entitled to recover the VAT charged to him under the provisions which permit refunds of VAT to DIY builders, which apply in the case of works which are "…the construction of a building designed as a dwelling….". These provisions are in section 35 VATA1994, but it will be apparent that the language is the same as in Item 2 of Group 5 of Schedule 8 VATA 1994.

The tribunal held that a houseboat is not a "building" for these purposes – this is so because the ordinary meaning of "building" (a permanent fixed structure or edifice built for occupation) does not encompass a houseboat; and, further, the Notes to Group 5 of Schedule 8 indicate that the word "building" in Group 5 connotes a structure attached to the land (see, for example, Note 18, which speaks of a building demolished to ground level).

The tribunal in that case also pointed out that the scheme of Schedule 8 VATA 1994 is to treat houseboats (and, it may be added, caravans) as a separate and discrete class of habitations, subject to their own zero-rating rules as provided in Group 9 of Schedule 8. It is consistent with this scheme, therefore, that the different rules applying to "buildings" should not extend to houseboats.

We agree with the decision in the Dr John Parkinson case. The Appellant's houseboat is not a "building" for the purposes of Group 5 of Schedule 8 VATA 1994.

Furthermore, in the Appellant's case there has been nothing which could be regarded as "the construction" of a building designed as a dwelling – there was no construction of the houseboat, but simply the work required to connect a fully-constructed and fitted-out houseboat to the mains water supply.

For these reasons the Appellant cannot argue that the relevant supplies to him were within the scope of Group 5 of Schedule 8 VATA 1994. Any argument he may have by way of analogy fails: in his correspondence the Appellant places much emphasis on the fact that, on creation of a residential mooring, a new dwelling comes about, and that the work carried out in connecting the houseboat to the water mains is related to that event – indeed, in planning terms, is a prerequisite of that event. However, the relief afforded by zero-rating is explicit, and the provisions setting out that relief must be applied in their specific terms. The coming into existence of a new dwelling place does not of itself give rise to zero-rating relief – it does so only in the specific and limited circumstances of the construction of a building designed as a dwelling. The Appellant may view this as discriminatory, but Parliament has chosen to limit the scope of zero-rating relief in this manner, and anyone whose circumstances, for any reason, fall outside the boundaries of the relief may have a sense of grievance, but the law is nevertheless clear and must be applied. As was mentioned in the Dr John Parkinson case, Parliament has chosen to extend zero-rating relief to houseboats and caravans in a different manner.

It is our conclusion that the circumstances of the Appellant's case do not come within any of the specific terms of zero-rating relief, as we have shown in the paragraphs above.

Therefore, since the supplies made by the contractor to the Appellant were not exempt supplies for VAT purposes they are taxable supplies. As taxable supplies, since they are not supplies which are taxable at the reduced rate nor at the zero rate, they are taxable at the standard rate.

Finally, we deal with the concession to which the Appellant refers, by which the supply of services to him on connecting his houseboat to the mains electricity supply was zero-rated. This was pursuant to the extra-statutory concession granted by the Commissioners and set out at paragraph 3.16 of Notice 48, which reads as follows:

"Connection to the gas or electricity mains supply, which would have been zero-rated supply before 1 April 1994 by virtue of Group 7 of Schedule 5 to the Value Added Tax Act 1983, may continue to be treated as a zero-rated supply provided that:

(a) it is the first connection to the gas or electricity mains supply (as the case may be) of …a houseboat…; and

(b) the person receiving the supply does not do so for the purpose of any business carried on by him"

Miss Neenan was not able to explain to us the rationale of this concession, nor why it relates only to connection to gas or electricity mains supplies – on its face it appears to preserve zero-rating relief which previously existed on a statutory basis, and the application to gas and electricity supplies appears to relate to supplies of domestic fuel or power, that is, those utility services which are now taxable at the reduced 5% rate under the provisions of Group 1 of Schedule 7A VATA 1994.

What is clear, however, is that the concession does not extend to connection to the water mains supply, and therefore is of no help to the Appellant in the present case. There is no basis in law on which the Appellant can claim that the concession should be extended or otherwise applied to the circumstances of the first connection of a houseboat to the water mains supply.

For these reasons, therefore, we conclude that the supply made to the Appellant in relation to the connection of his houseboat to the water mains was a standard-rated supply for VAT purposes and that the VAT charged to him was properly so charged.

We therefore dismiss the Appellant's appeal.

We make no order as to costs.

EDWARD SADLER

CHAIRMAN

RELEASE DATE: 7 December 2005

LON/2005/0580