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Henshaws Society for Blind People v Revenue and Custom [2005] UKVAT V19373 (08 December 2005)

19373

VAT – ZERO RATING – Construction of building – college for blind students – new residential block – whether extention to existing building – yes – whether annexe functioning independently – no – appeal dismissed.

VAT Act 1994 schedule 8 group 5, notes (16) and (17)

MANCHESTER TRIBUNAL CENTRE

HENSHAWS SOCIETY FOR BLIND PEOPLE Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack (Chairman)

Roger Freeston FRICS

Sitting in public in Manchester on 18 October 2005

Christopher Mellor, of counsel, instructed by Barnard Atkins, VAT Consultants, Manchester, for the Appellant

James Puzey of counsel instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

DECISION

Henshaws Society for Blind People ("Henshaws") is a registered charity that operates a fully residential college at Harrogate, North Yorkshire. The college, which is unique in the north of England, provides specialist further education for young people aged between 16 and 25 years old who are blind or visually impaired and who, in many cases, have additional disabilities or educational needs. Henshaws is registered for VAT.

Henshaws disputes a decision of the Commissioners of Her Majesty's Revenue and Customs ("the Commissioners") contained in a letter of 7 December 2004 relating to the Harrogate college. In that letter the Commissioners confirmed that building work carried out by Henshaws produced an extension to an existing building, and thus was standard-rated for VAT purposes. Henshaws maintains that the work was zero-rated either as amounting to the construction of a building under Item 2(a) of Group 5 of Schedule 8 to the Value Added Tax Act 1994, or comprising a qualifying annexe under the wording of Note 17 to Group 5 of the said Schedule 8.

We take the facts from the statement of facts agreed by the parties, and following a site visit by the Tribunal. (We also had before us the witness statements of Phillipa Williamson, the director of finance for Henshaws, and Eileen Marie Foster and Tracy Lewis, both of whom are officers of the Commissioners). The relevant works, which have been completed, involved the construction of (a) a new two storey residential unit to meet the needs of young people requiring wheelchair accessible accommodation and allowing for the flexible grouping of small numbers of them (particularly those with behavioural difficulties), an en-suite shower room and WC facilities, with additional communal living space (the "residential unit"); and (b) a new main college entrance hall and reception area to the existing college building where students have classes (the "teaching block") including at first floor level, inter alia, two new offices and a meeting room (the "entrance block"). The number of offices changed during construction from three to two to accommodate a larger meeting room. The teaching block is a single storey building.

The Residential Unit

The ground and the first floors of the residential unit principally contain 18 bedrooms each with an en-suite shower room and WC facilities, two kitchen / dining rooms and a living room, and a high dependency room on each floor. The ground floor of the residential unit adjoins the entrance block. The high dependency residence on the first floor of the residential unit is positioned above part of the ground floor of the entrance block. The first floor of the residential unit (including the high dependency residence) then adjoins the first floor of the entrance block. Nowhere does the residential unit adjoin the teaching block; the entrance block intervenes.

The residential unit has its own separate entrance (which is at the opposite end of the residential unit from the end adjoining the entrance block), from which a new purpose built, uncovered, footpath provides student access to the teaching block (again via a purposely formed separate entrance, i.e. not through the new entrance block). Located close to the entrance to the residential unit and inside that unit is a lift for use by students in moving between the ground and first floors. There is no such lift in the entrance block.

There is one fire exit door on each of the ground and first floors of the residential unit between the residential unit and the entrance block. Such fire doors are required for compliance with building regulations. The fire doors are for use only in case of emergency and remain locked (only the college bursar has a key to the doors) unless the fire alarm is activated (the doors are electronically linked to the fire alarm so that, if the alarm goes off, the doors automatically unlock). Access for students, visitors and staff both to and from the residential unit is by way of its separate entrance.

The Entrance Block

The ground floor of the entrance block contains, inter alia, an entrance lobby, a reception and waiting area, an office and two further meeting rooms. The ground floor of the entrance block leads into the teaching block. The décor is specially designed to attract students to the entrance block and direct them away from the party wall. As mentioned previously, the first floor of the entrance block consists principally of two new offices and a meeting room. There is no connection between the first floor and the teaching block, the teaching block being a single storey building. Also, as previously stated, the high dependency room (which includes an associated shower room) on the first floor of the residential unit extends over part of the ground floor of the entrance block. The ground floor of the entrance block adjoins, and, as already mentioned, forms the new main access to, the teaching block. Whilst the entrance block also adjoins the residential unit, the only direct access from the entrance block to the residential unit is through the fire doors. Throughout the college, areas are specially decorated and fitted out with colour contrasting paints and textured surfaces to assist the movement of students and to provide direction and guidance. On the ground floor of the entrance block such colour coding is designed to direct visitors and students away from the wall adjoining the residential unit and towards the reception desk and teaching block. Henshaws accepts that the entrance block, considered in its own right, is an extension to the existing teaching block.

Correspondence Between The Parties

In a letter to the Commissioners dated 7 August 2003, Henshaws' representatives asked the Commissioners to confirm that the construction of the new student accommodation at the college would qualify for zero-rating. The letter explained that Henshaws wished to address specific deficiencies in its existing student accommodation with regard to places for wheelchair users, students with more complex communication difficulties, the sharing of bathroom facilities and narrow corridors restricting movement. It described the works in question and further explained that they constituted the first phase of a proposed three-phased development. Having explained the details of the proposed construction, Henshaws' representatives stated their belief that construction of the residential unit would be zero-rated under Item 2(a) of Group 5 of Schedule 8 of the 1994 Act. The Commissioners replied in a letter of 6 January 2004 stating that the residential unit and the entrance block constituted "a single physically integrated whole which extends to an existing building" (sic). Therefore, they concluded that the residential unit did not amount to the construction of a building and accordingly did not qualify for relief under Group 5. In a letter of 14 May 2004, Henshaws representatives disputed the Commissioners' conclusion. They submitted that the construction of the residential unit qualified for zero rating pursuant to Item 2(a) of Group 5 of Schedule 8 under the "relevant residential purposes" and the "relevant charitable purposes" provisions as a separate building or, alternatively, in the latter case, as an annexe by virtue of Note 17(2) to the said Group 5. On 29 June 2004 the Commissioners confirmed their initial decision, reiterating their opinion that the residential unit was contained within a larger structure that included the entrance block and that the works amounted to an extension to an existing building. In those circumstances, they did not view the residential unit as an annexe, and thus considered Note 17 as inapplicable. On 7 December 2004 the Commissioners confirmed their decision to refuse zero rating. It is against that confirmation that Henshaws now appeals.

The Law

Provision for Schedule 8 to the 1994 Act is to be found in section 30 thereof. Item 2(a) of Group 5 of Schedule 8 provides for the zero-rating of:

"the supply in the course of the construction of – (a) a building designed as a dwelling or number of dwellings or intended for use solely for a resident residential purpose or a relevant charitable purpose; or (b) …."

It is common ground that the building constructed by Henshaws was intended for use for a relevant residential purpose.

Note 4 to Group 5 provides that "use for a relevant residential purpose" includes "(d) residential accommodation for students or school pupils". Notes 16 and 17 to Group 5 provide as follows:

"(16) For the purpose of this group, the construction of a building does not include –

(a) …; or

(b) any enlargement of, or extension to, an existing building except to the extent that the enlargement or extension creates an additional dwelling or dwellings; or

(c) subject to Note (17) below, the construction of an annexe to an existing building.

(17) Note 16(c) above shall not apply [where the whole or part of an annexe is intended for use solely for a relevant charitable purpose and] –

(a) [the annexe] is capable of functioning independently from the existing building; and

(b) the only access or where there is more than one means of access, the main access to:

(i) the annexe is not via the existing building; and

(ii) the existing building is not via the annexe."

(Words in Note (17) substituted and inserted by the VAT (Construction of Buildings) Order, SI 2002/1101 article 2 with effect from 1 June 2002)

Submissions for Henshaws

Mr Mellor, counsel for Henshaws, submitted that the following propositions could be distilled from the relevant case law.

(i) Deciding whether building works amounted to a new building, an enlargement, extension or annexe to an existing building involved an objective examination of the physical characteristics of a building, both before and after construction. There was, therefore, a two stage process: first, identifying the existing buildings as they were before construction began, and then determining whether the new construction satisfied all, or any, of Note 16 (see Cantrell v Customs and Excise Commissioners (2) [2003] STC 486, para 11 at page 491.

(ii) Regard must be had, inter alia, to similarities and differences in appearance, layout and how the buildings were equipped to function. The terms of any planning permission, motives and intended or subsequent actual use were irrelevant, save possibly to illuminate the potential for use inherent in the building (see Cantrell, quoting Lightman J in an earlier judgment at page 489).

(iii) As to the meaning of the words used in Note 16 in MacNamara v Customs and Excise Commissioners [1999] V&DR 171, the President of these Tribunals, His Honour Stephen Oliver QC, stated as follows (at paragraph 13):

"The scheme of the 1995 code [see VAT Construction of Buildings (Order) SI 1995/280] is to exclude from the expression "construction of a building" a series of building works. Note (16) deals with these in descending order of their degree of integration with the existing building. Conversions, reconstructions and the alterations of existing buildings, the most closely integrated, are excluded. Enlargements of existing buildings are then excluded, the word "enlargement" connoting structural work producing an overall increase in size or capacity. The word "extension" in relation to an existing building refers, we think, to building work which provides an additional section or wing to that existing building; the degree of integration is one stage less than with enlargements. Then come "annexes" which, as a matter of principle, are also excluded. The term annexe connotes something that is adjoined but either not integrated with the existing building or of tenuous integration. Annexes intended for use solely for relevant charitable purposes are re-instated into the zero-rated class by Note (17) only if they are capable of functioning independently from the existing building and if both the main access to the annexe is not via the existing building and the main access to the existing building is not via the annexe. Otherwise all annexes are excluded from zero-rating."

(iv) Dealing with annexes in particular, in Cantrell, the High Court held that:

"an annexe is an adjunct or accessory to something else, such as a document. When used in relation to a building, it is referring to a supplementary structure, be it a room, a wing, or a separate building" (paragraph 17 at page 493).

(v) Ultimately, however, the words should be given their ordinary everyday meaning and the appropriate test was therefore that of the "ordinary reasonable man", i.e. would he consider the construction a new building, an enlargement, an extension, etc. (see e.g. Waterways Services v Customs and Excise Commissioners (1990) VATTR 37 page 43 and Associated Nursing Services Plc v Customs and Excise Commissioners (1993) Decision No. 11203).

(vi) A construction could constitute a separate building even in circumstances where it was joined to another building by a party wall and there was a communicating door between the two (see e.g. Waterways Services and Associated Nursing Services).

Mr Mellor identified the issue in the instant case as simply one of whether the works in relation to the construction of the residential unit were zero-rated pursuant to Item 2(a) of Group 5 of Schedule 8 to the 1994 Act. He submitted that that necessarily involved the consideration of:

(a) to what extent the entrance block and residential unit had to be considered "as a whole";

(b) whether the residential unit constituted the construction of (i) a separate building; or (ii) an annexe; or (iii) an extension;

(c) if it did constitute an annexe, whether it complied with the criteria set out in (a) and (b) of Note 17 to Group 5.

Mr Mellor further submitted that:

(1) the entrance block and the residential unit could, and indeed should, be considered separately on the facts of the case;

(2) the works in relation to the residential unit constituted the construction of a separate building and therefore failed to be zero-rated pursuant to Item 2(a) of Group 5;

(3) alternatively, and without detracting from the primary argument at (2) above, the residential unit constituted an annexe that complied with the criteria set out in (a) and (b) of Note 17.

Whilst accepting that the submissions were separate, he indicated that they were clearly inter related. If the residential unit, considered separately, constituted a separate building or an annexe, and would therefore, in such circumstances, be treated differently from the entrance block (it being conceded that the entrance block considered on its own constituted an extension) that obviously went to support the submission that that too should be considered separately.

The Entrance Block and the Residential Unit should be Considered Separately

As a preliminary point, Mr Mellor accepted that the entrance block, considered in its own right, was an extension to the existing teaching block. He added that it was not suggested that the supplies in the course of construction of the entrance block fell to be zero-rated under Group 5 and did not pursue such a contention. He did, however, submit that the residential unit could, and indeed should, be considered separately from the entrance block on the facts of the case as it constituted a separate building or, alternatively, an annexe. In the event, it was not so integrated with the entrance block so as to form part of "a single unified structure" as the Commissioners contended.

Dealing with the entrance block and the residential unit separately, he submitted that there was no legal authority that required them to be considered as a whole. Whether they could, or should, be treated separately or as "one single unified cohesive structure" was not a matter of law but rather an issue of fact (see e.g.. Parochial Church Council of St Andrews v Customs and Excise Commissioners (2005) Decision No. 19061 where the tribunal confirmed that such a matter remained an issue of fact).

The Commissioners relied on the decision in Thomas Rotherham College v Customs and Excise Commissioners (2002) Decision No. 17841 to support their conclusion that the entrance hall and residential unit must be considered as a whole, but, Mr Mellor submitted, the facts of that case were entirely different from those of the present case. In Thomas Rotherham College, the college built a new sports hall alongside an old sports hall. As the ground and second floors of the new hall each had its own entrance but the first floor did not (as it was entered by the old hall), the college sought to argue that it had not added one new building but instead had added three independent units (i.e. each floor should be considered separately), two of which qualified for zero-rating as independent annexes. The tribunal held that it could only view the new building as a single entity. In Thomas Rotherham College, the appellant was seeking to separate floors in what was clearly one building which had a single function as a sports hall, and therefore, Mr Mellor contended, it was unsurprising that the tribunal concluded that the construction must be treated as a single entity. In contrast, he maintained that in Henshaws' case there was a clear distinction between the college entrance block and the residential unit, and, indeed, between the residential unit and the teaching block.

Functional Integration

Mr Mellor submitted that to suggest, as the Commissioners had, that there was "functional integration" between the residential unit, the entrance block and the existing college building, simply on the basis that the residential unit was the essential component of the whole establishment, i.e. of the college, made little sense. If such an approach was correct, any entirely separate residential block in the grounds of a college which provided residential accommodation for its students would be "functionally integrated" with the other buildings. In reality, he maintained, the residential unit had an entirely different function from both the entrance block and the existing teaching block: it provided residential accommodation for the students. In contrast, the entrance block provided a reception area at the entrance to the teaching block, and a meeting room and offices, and the teaching block providing teaching facilities, namely specially equipped classrooms. Furthermore, the residential unit was equipped to function entirely differently, and independently, from the entrance block and the teaching block.

Physical Integration

Whilst he accepted that there was some physical integration between the residential unit and the entrance block, Mr Mellor contended that such integration was minimal when the construction was looked at as a whole. There was no physical integration between the residential unit and the teaching block, save to the limited extent that there was such integration with the entrance block (which, as Henshaws accepted, considered on its own formed an extension to the teaching block).

As the Commissioners referred particularly to the fact that there was a fire door on both the ground and first floors of the residential unit which led into the entrance block. In dealing with that reference, Mr Mellor maintained that such doors had only been included in order to comply with building regulations and would only be used in case of emergencies. Whether there was no means of access from the residential unit to the entrance block, or visa versa, save for those doors. The residential unit having its own entrance at the far end of the building away from the entrance to the entrance block. Indeed, those persons going from the residential unit to the teaching block entered the latter through an entirely separate entrance from the entrance block.

Mr Mellor maintained that a construction could certainly still constitute a separate building in circumstances where it was joined to another building by a party wall and there was a communicating door between the two (see Waterways Services and Associated Nursing Services): indeed in the former, the tribunal quoted Woolf J (as he then was) in Customs and Excise Commissioners v Perry [1983] STC 383 in which the learned judge referred to the existence of such a fire door as being one such possible case).

Mr Mellor maintained that the present case was entirely different from that of Thomas Rotherham College, where the "units" that the appellant there was seeking to separate were different floors "encased within the same four walls". He observed that in the instant case, the residential unit consisted of a much larger construction to the entrance block which, save for sharing a party wall at one end, was separate from it.

Visual Integration

Finally, Mr Mellor dealt with visual integration. He accepted that there was some visual integration between the entrance block and the residential unit, although there was not such visual integration with the existing teaching block. However, he averred that in the light of the lack of any functional integration and the very minimal physical integration, such a consideration should not, and did not, lead to the conclusion that the residential unit and the entrance block constituted the unified whole and should be considered together. As was apparent from Castle Caereinion Recreation Association v Customs and Excise Commissioners (2004) Decision No. 18303 visual integration is not determinative. Therefore, on the facts of the present case, Mr Mellor submitted that given that the entrance block and residential unit were so distinct, they should be considered separately. Simply because the entrance block and the residential unit were constructed at the same time did not require them to be subject to the same VAT treatment. If the construction of the residential unit constituted, as Henshaws' contended, either the construction of a separate building or alternatively an annexe to the existing college buildings, it must clearly be treated differently for the purposes of Group 5.

The Residential Unit – does it constitute a separate building, an annexe or an extension?

Separate Building

If an objective examination of the physical characteristics of the college buildings (both before the work and after it) was undertaken, Mr Mellor submitted that the residential unit was a separate building from both the teaching block and the entrance block. He maintained that such a conclusion was apparent from a consideration particularly of the difference in how the buildings were equipped to function as well as their layout. Ultimately, the words in Note 16 must be given their ordinary meaning and the appropriate test was that of the "ordinary reasonable man". In the event, and bearing in mind the size of the residential unit in comparison to the college and entrance block, and the difference in how the buildings were equipped to function, he submitted that such an ordinary man would conclude that the construction constituted that of a separate building.

An Annexe

If the tribunal did not accept his primary submission, and was not satisfied that the residential unit amounted to a separate building, as an alternative submission, Mr Mellor contended that it constituted an annexe.

He accepted that Note 16(c) required that the residential unit had to constitute an annexe "to an existing building". Furthermore, on the facts of the instant case, the existing building was the old teaching block, the entrance block probably being an extension to the existing building, and the residential unit did not in fact adjoin the existing college building at any point; rather it adjoined the new entrance block. However, as mentioned earlier, in Cantrell, the divisional court confirmed that an annexe could be a separate building, holding that Note 16 introduced the concept that the building and its annexe might be physically separate so that the connection between them was by way of some other association (see the judgment of the Vice Chancellor at page 493). Therefore, in Mr Mellor's submission, the fact that the residential unit did not in fact adjoin the existing teaching block did not prevent it being an annexe, an adjunct or accessory to it for the purposes of Note 16. In the event, however, Henshaws reiterated its primary case that the residential unit constituted a separate building rather than an annexe (see Associated Nursing Services and Alan Walter Developments Limited v Customs and Excise Commissioners (2005) Decision No. 19131, where the distinction between the two was considered in detail).

An Extension

Mr Mellor maintained that in the light of the arguments he had previously advanced, the residential unit could not be considered to be an extension to the existing building (or indeed, to the entrance block). He maintained that such a conclusion would run entirely contrary to the objective characteristics of the building, particularly bearing in mind how they were equipped to function, the lack of any significant interaction and physical integration between them, their layout, and the respective size of each construction. Indeed, he contended that it was relevant to consider the size of the residential unit in contrast to the other buildings, when asking whether it constituted an extension. In the context of "conversions, alterations and enlargements", Stuart Smith LJ in Marchday Holdings Limited v Customs and Excise Commissioners [1997] STC 272 (at 278) stated that:

"… It will be a question of fact and degree as to whether something could properly be described as an enlargement of an existing building. The additional works may be so extensive in comparison to the original, that it would be a misnomer".

He submitted that, by analogy, the suggestion that the residential unit was an extension, either to the teaching block or to the entrance block was simply a misnomer. In the instant case, it initially appeared that the Commissioners' conclusion that the residential unit constituted an extension principally stemmed from their assertion that the entrance block and the residential unit had to be considered as one structure. Having come to that conclusion, given that the entrance block was an extension, they contended that the residential unit was an extension as well. In the event, however, it appeared that the Commissioners would go even further and assert that, even if the entrance block had already existed, the construction of the residential unit would have constituted an extension. Mr Mellor submitted that, in the light of the analysis above, such an assertion was simply untenable. Ultimately, however, he contended that the tribunal should consider whether in all the circumstances the construction, including both the entrance block and the residential unit, viewed objectively, could be described as an extension, giving the word its normal ordinary meaning as the Commissioners contended. He submitted that the ordinary reasonable man would not say that it could, bearing in mind particularly the size of the residential unit, its totally different function, and the lack of any significant physical integration. He further submitted that the ordinary man would say that the entrance hall was an extension to the teaching block and the residential unit was a new separate building.

In all the circumstances, Mr Mellor finally submitted that the supplies relating to the construction of the residential unit qualified for rating, it being a separate building, so that Henshaws' appeal should be allowed.

Submissions for the Commissioners

Mr Puzey, counsel for the Commissioners, relied both on the passage above cited from the decision of the President of these Tribunals in MacNamara and also on the following passage from the judgment of Lightman J in the case of Cantrell v Customs and Excise Commissioners [2000] STC 100:

"The two-stage test for determining whether the works carried out constituted an enlargement, extension or annexe to an existing building is well established. It requires an examination and comparison of the building as it was or (if more than one) the buildings as they were before the works were carried out and the building or buildings as they will be after the works are completed; and the question then to be asked is whether the completed works amount to the enlargement of or the extension or the construction of an annexe to the original building (see Customs and Excise Commissioners v Marchday Holdings Limited [1997] STC 272 at 279). I must however add a few words regarding how the question is to be approached and answered, for this has been the subject of some lack of clarity (if not confusion) in a number of the authorities cited to me and it is the failure to approach and answer the question in this case in the correct way which flaws the decision. First the question is to be as at the date of supply. It is necessary to examine the pre-existing building or buildings and building or buildings in the course of construction when the supply is made. What is in the course of construction at the date of supply is in the ordinary case (save for example in the case of dramatic change in the plans) the building subsequently constructed. Secondly, the answer must be given after an objective examination of the physical characters of the building or buildings at the two points in time, having regard (inter alia) to similarities and differences in appearance, the layout and how the building or buildings are equipped to function. The terms of planning permissions, the motives behind undertaking the works and the intended or subsequent actual use are irrelevant, save possibly to illuminate the potentials for use inherent in the building or buildings."

From the MacNamara and Cantrell decisions, Mr Puzey discerned the following propositions:

(a) the task of analysing and characterising building works is to be approached objectively and by considering what existed at the site before and after the construction work was undertaken and completed;

(b) the term "building" is to be given its ordinary everyday meaning. It is not usually possible to subdivide one structure into more than one building;

(c) enlargements, extensions and annexes can be seen as a descending sequence in terms of integration with an existing building. Annexes are the least integrated of the three and whilst they may adjoin an existing building, they are either not integrated or of tenuous integration;

(d) integration is not primarily determined by the function or purpose of the annexe, extension or enlargement, but by its physical characteristics. As Lightman J observed in Cantrell, the intended or actual use is irrelevant, save possibly to show what a building could potentially be used for;

(e) an annexe is not defined by Note 17 to Group 5 of Schedule 8. Unless it is established that a construction is an annexe rather than an extension or enlargement, one cannot then go on to consider whether the conditions in Note 17 are met, see Colchester Sixth Form College v Customs and Excise Commissioners (1999) Decision No. 16252.

Mr Puzey submitted that Henshaws had concentrated its arguments on the contention that the conditions of Note 17 were met, i.e. that the residential area was capable of independent function and had its own separate entrance. He maintained that that would appear to fall into the error of defining an annexe in terms of Note 17.

Henshaws also sought to maintain that the residential unit was a separate building in its own right because it was not integrated with the entrance hall area and there was no access between the two. That was also relied upon to support what Mr Puzey contended was a contradictory argument - that what had been constituted was an annexe to an existing building. However, Henshaws apparently accepted that the entrance hall and associated rooms were an extension to the teaching area. He accepted that as a realistic concession given the close access and integration between those two areas. Nevertheless, he maintained, the attempt to argue that the entrance area and residential part were separate buildings was flawed. The existing building was a college for disabled young people with residential accommodation some distance away and separate. The present building with the addition of Phase 1 remained a college, but now with additional offices and waiting rooms and a residential area. The entrance and residential areas were clearly one unified structure: there was internal access between the two areas albeit said to be only for emergency use. The upstairs high dependency accommodation was over the entrance hall, and, as was the situation in the Thomas Rotherham College case, it was not possible to try to subdivide the single building project into more than one building.

Furthermore, Mr Puzey submitted it could not be said that the residential area was of tenuous integration with the rest of the building. It was closely integrated in form, structure and purpose. The intended use of that area was for accommodation, not teaching, but even accepting that intended use maybe relevant, the siting of that accommodation with the entrance and teaching areas simply furthered the principal aim of the project which was to draw those students with greater difficulties closer to the administration and teaching area.

In summary, Mr Puzey further submitted that an objective analysis of the residential construction works demonstrated that the existing college building had been extended and that there had not been the construction of a new building or an annexe.

Conclusion

We have most carefully considered the submissions of both parties and, with the utmost reluctance, for the reasons submitted by Mr Puzey, concluded that the building work carried out by Henshaws was that of the construction of an extension to the existing college building, and thus did not qualify for zero-rating. Mr Mellor accepted that the entrance block, considered in its own right, was an extension to the existing teaching block. We agree with him, but are unable to accept his further contention that the residential block was not so integrated with the entrance block that the two did not form a single unified structure. We find that the two consist of one single, unified, cohesive structure. In doing so, we accept that the residential unit was designed and equipped to function differently from the entrance block and teaching block; and that the fire doors were included in order to comply with building regulations and were only to be used in case of emergencies. Nor are we able to accept the submission that the residential unit constituted an annexe to an existing building: the residential block, in our judgment, adjoined and was integrated with the existing building. Finally, we observe that even if the residential block were an annexe intended for use solely for a relevant charitable purpose, it was incapable of functioning independently from the existing building, the high dependency unit at first floor level being directly over the entrance block at ground floor level, and of necessity having some services in common with it.

We dismiss the appeal, and make no direction as to costs.

DAVID DEMACK

CHAIRMAN
Release Date: 8 December 2005

MAN/04/0794