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Cite as: [2007] UKVAT V19985

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Gillin v Revenue & Customs [2007] UKVAT V19985 (22 January 2007)

19985

VALUE ADDED TAX — do-it-yourself scheme — VATA 1994 s 35, Sch 8 Group 5, Notes (16), (18) — chalet supported on legs resting on concrete base replaced by stone-built dwelling with conventional foundations — incorporation of small part of chalet into finished dwelling — incorporation not limited to a façade and not a condition of planning consent — whether chalet a "building" for purposes of legislation — yes — refund correctly refused — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

STEVEN GILLIN

Appellant

- and -

THE COMMISSIONERS FOR HER

MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Colin Bishopp (Chairman)

Roland Presho FCMA

Sitting in public in North Shields on 13 November 2006

The Appellant in person

Charles Morgan, counsel, instructed by the Solicitor's office of HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2007

DECISION

In this appeal Steven Gillin challenges the Respondents' refusal to refund to him the VAT he incurred in the construction of a dwelling at Thrunton, Northumberland. Mr Gillin contends that the works he undertook came within the provisions of section 35 of the Value Added Tax Act 1994 – provisions relating to what is commonly known as the do-it-yourself builders' scheme – while the Respondents argue that the works are excluded from that section, and no refund is due.

Mr Gillin represented himself at the hearing, while the Respondents were represented by Charles Morgan of counsel. We heard no formal evidence as the facts were largely agreed. We were provided with a bundle of relevant documents and Mr Morgan submitted a helpful skeleton argument. We should mention that the appeal had been opened in June 2006 before a differently constituted tribunal. It was adjourned when it became apparent that Mr Gillin was advancing an argument which seemed not to have been raised in his grounds of appeal, and the tribunal considered it appropriate to allow the parties an interval in order to consider more fully how the case was to be put, on both sides. The resumed hearing was listed before us; rather than postpone it again in order that the original tribunal could be reconstituted we heard it afresh, with the parties' agreement.

Mr Gillin acquired a chalet, of a type often described as a "mobile home", on land at Thrunton. The manufacturer's specification and plans, which were included in the bundle, show a structure consisting of a floor, walls and pitched roof, mostly of wooden panels with appropriate external rendering, laid out internally in rooms designed for residential accommodation. It resembled a conventional bungalow, with the significant exception that, instead of being laid on foundations set in the ground, it was supported by steel legs bearing on a concrete raft. We were provided with a copy of a report by an architect, Mr I A Murphy, which indicated that immediately before the work which gives rise to this appeal began in 2001, the chalet was in poor condition and that it could not have been extended on its existing raft, since the latter was incapable of bearing a greater load. It had no mains services, such as one would expect in the case of a conventional building – it relied on a generator for electricity, a spring for water and a septic tank for drainage. There was no gas supply. We should add that the chalet had been erected in about 1983, with a designed life-span of about 35 years. It had been erected with the benefit only of temporary planning permission, later renewed on a temporary basis before it was converted to permanent permission.

Mr Gillin's intention – we understood it to have been his intention at the time he acquired the chalet – was to undertake work in order to provide himself and his family with living accommodation to a higher standard, in terms both of size and of quality, than that of the chalet. The ideal solution would have been to demolish and remove the chalet and build an entirely new dwelling. Unfortunately, that was not possible: the property is situated in an Area of Outstanding Beauty in which permission to construct new buildings is extremely difficult to obtain. Among the documents produced to us was a letter written by the Principal Building Control Officer of Alnwick District Council, the local planning authority, in which he said that it was "unlikely that this authority would grant planning permission to demolish and rebuild a dwelling on this site". Extension and alteration, within limits, were however possible.

Mr Gillin's solution was to apply for permission, first, to extend the kitchen of the chalet and, second, to erect a conservatory. The planning authority agreed to these applications in, respectively, January and June 2001. The work actually undertaken, however, bears only a tenuous resemblance to the work nominally permitted, though it seems the planning authority was acquiescent in what was done: that is, it appears to have been willing to circumvent its own rules prohibiting the construction of new dwellings, no doubt because the intended structure was much more in keeping with the landscape than the chalet it replaced. The Principal Building Control Officer's letter, to which we have already referred, described what was done in these terms:

"The work involved removing the external cladding, roof and floor structures etc and retaining the timber frame of the external walls only. A new cavity wall was then constructed around this frame to support the new floor and roof structures. The chalet was also extended with a kitchen/conservatory extension to the north and a bathroom extension to the south.

"The planning and building regulations were for significant alterations and extensions of an existing dwelling. However, in practice it could be considered that these changes effectively resulted in the creation of a new dwelling."

Mr Gillin agreed that the letter accurately described the work.

The photographs of the chalet, the work in progress and the finished dwelling show that the latter is entirely different from the former. What was a typical chalet of wooden cladding constructed on a steel frame and supported above ground level is now a stone-built bungalow, with conventional foundations. A casual observer, knowing nothing of the history, is unlikely to realise from what is now on the site that it was formerly occupied by a chalet. It is, in our view, quite clear that for all practical purposes Mr Gillin has indeed achieved what was not, strictly, permitted, namely the substantial removal of the old and the construction of an entirely new dwelling, albeit some parts of the old have been incorporated in the new.

Section 35 of the 1994 Act, so far as material, is in these terms:

"(1) Where—

(a) a person carries out work to which this section applies,

(b) his carrying out of the works is lawful and otherwise than in the course or furtherance of any business, and

(c) VAT is chargeable on the supply, acquisition or importation of any goods used by him for the purposes of the works,

the Commissioners shall, on a claim made in that behalf, refund to that person the amount of VAT so chargeable.

(2) The works to which this section applies are—

(a) the construction of a building designed as a dwelling …

(4) The notes to Group 5 of Schedule 8 shall apply for construing this section as they apply for construing that Group."

At first glance, it seems that Mr Gillin qualified for the refund referred to in subsection (1). He constructed a building designed as a dwelling and did so otherwise than in the course of a business, since the resulting dwelling was intended for occupation by himself and his family (and Mr Gillin is in any event not in the business of house-building). So much is agreed and, despite the apparent discrepancy between the planning consents and what was actually done, it is not argued that the work was unlawful. However, the Respondents say, the notes to Group 5 of Schedule 8, imported by subsection (4), defeat Mr Gillin's claim. So far as presently material those notes are as follows:

"(16) For the purposes of this Group, the construction of a building does not include—

(a) the conversion, reconstruction or alteration of an existing building; or

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

"(18) A building only ceases to be an existing building when:

(a) demolished completely to ground level; or

(b) the part remaining above ground level consists of no more than a single façade or where a corner site, a double façade, the retention of which is a condition or requirement of statutory planning consent or similar permission."

It has not been suggested that the works have created an additional dwelling. The Respondents were, at first, under the impression that Mr Gillin intended to argue that what he had done could not be described as "the conversion, reconstruction or alteration of an existing building" since the original building – the chalet – had ceased to exist. Mr Gillin did indeed argue before us that for all practical purposes the chalet had ceased to exist. If the new building were removed, what little remained of the chalet would simply collapse as it had no independent means of support whereas, if the remaining parts of the chalet were removed, the new building would remain structurally sound. The incorporation of a small part of the chalet into the finished dwelling was done merely to satisfy the terms of the planning permission (that he should extend, rather than replace, the chalet) and the remains of the chalet had no structural or functional utility. We accept that his contention is factually correct.

That, however, is not the test and, had that been the extent of Mr Gillin's case, we agree it would be bound to fail since, as the letter of the Building Control Officer to which we have already referred makes clear, various parts of the chalet have been retained. Those parts, though we accept they amount to very little and are of no consequence in themselves, are nevertheless not confined to one or two façades, and, additionally, there is no requirement in either planning permission that any identified part of the chalet be retained. It is, of course, a necessary inference that some, at least, of the chalet should be retained, since the consents were for its extension or enlargement rather than replacement; but it is plain from the wording of note (18)(b) that a specific requirement, rather than inference, is required, and that the requirement must relate to one or two façades, and not to other parts of the structure. The work does not come even near to complying with Notes (16) and (18) to Group 5 of Schedule 8.

It emerged, however, that Mr Gillin's true argument was that the chalet was not a building at all, with the consequence that notes (16) and (18) had no application to his case. He relied on the fact that the chalet was not fixed to the ground, but merely rested on the slab, by means of legs which were not secured by, for example, bolts. Indeed, it had no firm foundations; the slab was inadequate to serve as the base for the new building and no use of it had been made when it was built – a wholly new set of foundations had been dug outside its perimeter. Even if, finally, permission had been granted for its permanent retention, the fact that when the chalet was first placed, and for several years after, it had the benefit of only a temporary planning consent implied that it was not a building in the conventional sense.

For the Respondents, Mr Morgan argued that the chalet must be considered to have been a building if the word was used in its ordinary sense. In the absence of any definition within the 1994 Act, he relied on the Oxford Concise Dictionary which defined a " building" as a "structure with a roof and walls", a description which plainly fitted the chalet. It had been, he said, a substantial construction, even if it had a limited life-span. It would need to be dismantled if it were to be moved. The word "building" offered the most natural description, one used by the surveyors and other professionals whose reports were included in the bundle, and a term used by Mr Gillin himself in his notice of appeal, in which he described it as a "portable building".

Mr Morgan produced a number of authorities which, he said, supported his argument that the chalet was to be regarded as a building. In Parkinson v Commissioners of Customs and Excise (200l) Decision 17257 the tribunal was required to consider the conversion of a disused lighter into a permanently moored houseboat. Mr Morgan sought to distinguish the chalet from the houseboat (which the tribunal found not to be a building) on the grounds that the chalet had walls and a roof, that the chalet could readily be described as a "house", that it could not be easily moved and was intended to remain in a fixed position (and in fact had remained in a fixed position for 20 years), and, even if not fixed to the ground, was in contact with the ground by means of its legs. With respect to Mr Morgan, we think he has misread the case. The houseboat had a roof and walls, as the Commissioners conceded before the tribunal. It is plain from the decision that the houseboat was supported on piles driven into the riverbed, one pile being partially within the hull of the boat, for the express purpose of keeping it in a fixed position, unaffected by the tides. We observe too that the term used in the legislation is not "house" but "dwelling", a word equally applicable to a houseboat as to a chalet.

We find the case of limited help because it was decided not on the interpretation of Notes (16) and (18) but on the basis that the 1994 Act, in Item 2 of the Group 9 to Schedule 8, contains a separate regime for houseboats and, for that reason, they could not be considered to be buildings within Group 5. We do not consider that the case is in point at all.

Mr Morgan referred us to four cases in which the courts had considered whether structures remained chattels or became part of the land when erected. They are Assessor for Renfrewshire v Mitchell (1966) Scots Law Times 53, H E Dibble Ltd v Moore [1970] 2 QB 181, Deen v Andrews [1986] 1 EGLR 262 and Elitestone Ltd v Morris [1997] 1 WLR 687, the last a decision of the House of Lords. Since they were all addressing a quite different question, we find them also of limited help, save in one respect. One can draw the inference that a structure which is attached to the land is likely to be part of the realty (and as a matter of ordinary usage more aptly described as a building) whereas, if it is not, the question is open; and in Elitestone v Morris it was made even more clear that the lack of fixing to the ground does not point inevitably to the conclusion that the structure is a chattel. Much depends on the intention of the person who placed, or erected, the structure. On the question before us, that is whether the chalet was a building within the meaning intended by the draftsman of Group 5, none of the cases offers any direct guidance. And as Mr Morgan himself recognised, the answer to the question whether the chalet was realty or personalty does not necessarily answer also the question whether it was a building.

In the absence of any definition, or any other material in the statute from which a definition might be derived, it is necessary, in our view, to ask oneself nothing more sophisticated than whether a dispassionate observer, looking at the chalet, could describe it as a building, or would think another term more suitable. We have come to the conclusion that the only reasonable answer is that the word "building" is not only the most suitable, but the only word which, unprompted, would come to the mind of such an observer. The structure was substantial, designed to remain in a fixed position for many years, and to be occupied as a family's home. It was, as we accept, fixed to the ground only in the sense that it was held down by gravity, but considerable effort would have been required to overcome the gravitational force and, for all practical purposes, the chalet was as immovable as if it had had sunken foundations. We are fortified in our conclusion by the use of the word "building" to describe the chalet in the various professionals' reports which we have mentioned, including the local planning authority, and by Mr Gillin himself. It is also significant, in our view, that before the work began the chalet was the principal structure on the site, like that in Elitestone v Morris (which was found to be part of the realty) and not, as in Dibble v Moore and Deen v Andrews (in both of which they were found to be chattels), a subsidiary item.

We have therefore concluded that the chalet was a building. It was not demolished to ground level, even though so much of it as remains is inconsequential and could have been removed without any adverse effect on what now exists. The tests imposed by notes (16) and (18) are, however, strict and they must be interpreted in accordance with their terms; we have no margin of discretion. Since Mr Gillin has not satisfied the requirements of section 35, taken with the notes, it follows that the Respondents were right to refuse his claim. The appeal must, therefore, be dismissed. There will be no direction in respect of costs.

COLIN BISHOPP

CHAIRMAN

Release Date 22 January 2007

MAN/2005/0812