United Kingdom VAT & Duties Tribunals Decisions

Wanklin (Haresfield Court Tenants Asso.) v Revenue & Customs [2007] UKVAT V20133 (27 April 2007)

20133

Works of alteration to a listed building - Group 6 Schedule 8 VATA 1994 - the replacement of a glass passageway roof with a slate roof and the replacement of a fibre board ceiling with a plaster skimmed ceiling - roof leaking in places - some rot at one end - were these works of repair and maintenance - held yes - apportionment under Note (9) discussed.

LONDON TRIBUNAL CENTRE

MRS ANN WANKLIN ON BEHALF OF HARESFIELD COURT TENANTS ASSOCIATION

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS

Tribunal: CHARLES HELLIER (Chairman)

SHEILA WONG CHONG FRICS

Sitting in public in Bristol on 19 January 2007

Mrs Ann Wanklin in person

Anna Markham of Counsel instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1. Mrs Wanklin appeals against a decision of the Respondents made in a letter dated 17 March 2006. The Respondents decided that the replacement of a roof over a corridor at Haresfield Court were works of repair and maintenance and therefore were not eligible for zero rating within Item 2 Group 6 Schedule 8 VATA 1994.

The Evidence and the Facts

2. We heard oral evidence from Mrs Wanklin and from David Chapman who was Chairman of the residents' association at Haresfield Court. We saw copies of the plans for the work that was done and had before us a bundle of copy correspondence. Most helpfully the Appellant also produced colour photographs of the relevant parts of the building showing the appearance, construction and state of the relevant parts before the works were done. From that evidence we find the following facts. Where relevant we have also set out our impressions.

(1) Haresfield Court is a, mainly 17^th century, grade II listed building. It is divided into 11 apartments. It is constructed of stone and brick and its main roofs are covered with Cotswold stone and slate. Mrs Wanklin lives in number 3 on the ground floor.

(2) Within the building there is an enclosed courtyard, into the walls of which windows are fitted providing light for rooms of the house. Along one side of the courtyard runs what appears to have been a servants' passageway linking various ground floor rooms. The passageway is one storey high and the surrounding walls of the courtyard are two or more storeys height. The passageway is enclosed with a brick wall facing the courtyard (we call this the "exterior wall") and has a window and a door through this wall leading onto the courtyard. On each of the two sides of the courtyard adjoining the passageway are smaller one storey extensions. We shall call them "lean to" extensions but do not intend by that term to indicate that they lack any degree of permanence or lack of substance, for they are brick built with corrugated iron roofs (those corrugated roofs are not made of the corrugated iron of pigsties - with a sinusoidal cross section - but have a more rectangular wave cross section. They are black in colour and look uptogether).

(3) The passageway forms part of Mrs Wanklin's flat.

(4) Before its replacement the roof of the passageway consisted of about 20 large, (about 18" by 4') rectangular sheets of wired glass. The higher end of each sheet abutted the main wall of the house and the lower end was borne by the exterior brick wall. These sheets were joined by wooden glazing bars. Metallic tape ran over the exposed part of the glazing bars sealing the joints between the bar and the glass pane on either side. At one end of the passageway the pitch of the roof turned 90^o around a hip.

(5) The passageway had at some time been fitted with a suspended ceiling made from fibreboard tiles. Various pipes, wires and ducts ran in the roof void. There was some insulation material above the ceiling.

(6) At the hip end of the roof there had been some water penetration. This had caused some rot in the glazing bars and also in the wooden wall plates on the exterior wall of the passageway on which the roof rested at that end.

(7) Along the courtyard edge of the roof was a gutter. There were signs that this had blocked and overflowed in the past. The glass of the roof had a small amount of moss and lichen cover.

(8) Our impression of the roof from the photographs was that the roof was ill kempt and sad. The metallic tape sealing the joints between the glass panels and the wooden glazing bars was uneven, dirty and ugly. The gutters looked in need of sprucing up. It contrasted unfavourably with the corrugated iron roofs of the two lean-to extensions.

(9) The works at issue in the appeal constituted the replacement of the passageway roof. The corrugated roofs of the lean-to extensions were not replaced. The glass roof, the glazing bars, the wall plates and the false ceiling were removed. A new roof was built using:

(i) new rafters, ceiling joints, battens, felt and tiles,

(ii) new wall plates where the highest part of the roof adjoined the main walls of the courtyard,

(iii) the original front wall plates,

(iv) new lead flashings,

(v) new guttering, and

(vi) a new insulated plasterboard ceiling skimmed on the underside.

Some building up of the external wall was undertaken, a light well was provided into the passageway with a velux light above it in the new roof, and an access hatch was provided into the roof void. The works cost £6,465 before any VAT.

(10) Listed building consent was obtained from Stroud District Council for the works. In the Written Justification for the works which accompanied the application for Listed Building consent, the consulting engineers said:

"The roof and its glazing is old and its exposed wall plate is rotting due to damp penetration due to poor detailing at eaves level; with a ceiling installed, little use is made of glazing for the passageway.

"It is therefore proposed to renew the roof to modern construction standards, but with a more serviceable slate-type roof covering and a single conservation roof light…

"It is considered that the proposed replacement roof, not visible externally to Haresfield Court, and be more in character with the robust nature of the whole building."

In giving the council's consent the council development control officer noted:

"The area of this proposal which affected the character of the listed building is the replacement of a passageway roof…The passageway is a C20 [which we understand to mean twentieth century] addition to the building and is not of special interest. The roof, which is currently glazed, is in a poor structural condition. The proposal is to repair the roof structure, and cover it in a slate-type covering. This will not have a detrimental impact on the character of the listed building and will help to secure its long-term use and preservation."

(11) The cost of the works was borne by the residents of Harefield Court in shares. The residents decide at an annual meeting what works to undertake. Last year they asphalted the driveway and recently moved the dustbin area. This was the first replacement affecting the fabric of the house which they had undertaken.

(12) The roof can be seen from the window of the main stairs of the house and directly from the windows of 4 or 5 of the flats. Mr Chapman could see it from his flat. He did not like what he saw.

(13) The reasons the residents decide to undertake the works were these:

(i) the old roof was an eyesore;

(ii) there was a concern on Mrs Wanklin's part that stone tiles could fall from the house roof above onto the glass roof, smash it and endanger her;

(iii) the old structure did not retain heat within the passageway; and

(iv) there was a leak and some consequent structural damage at the hip end of the roof.

3. The letter quoted at paragraph (10) above suggested that the whole of the wall plate was rotten. The photographs showed rot in the hip end of the wall plate but did not show the condition of the remainder of the wall plate. Mrs Franklin's evidence suggested that there was no serious rot obvious in the other parts of the wall plate. In our judgment it is more likely than not that a larger part of the wall plate had suffered water damage than was immediately visible at the time, and that inspection of the wall plate adjacent to the visibly damaged portion would have revealed deterioration. On this basis a decent repair job would in our view have involved replacing a significant proportion of the wall plate. The replacement of part only of the exterior wall plate would not have been an easy operation. The roof above it would have had to have been removed and the supporting structure propped from below.
4. The photographs of the interior of the roof showed no significant visible water damage to the wooden glazing bars away from the hip end of the roof. However the presence of the metallic tape over the exterior of the glazing bars suggested to us that there was some rot or failure in the junction between the glass and the bars which would have required attention (including, if the roof had been left as it was, the continual monitoring and occasional replacement of the metallic tape sealant).
5. The hip end of the roof was in the corner of the internal courtyard and abutted one of the lean-to extensions. Access to the roof at this point would not have been easy. It seemed to us that it was more likely than not that the replacement of the rotten timber at the end would have involved removing the internal fibreboard ceiling and working both from above and from below. We concluded that a good one third of the roof would have had to be removed and replaced in order to effect a workmanlike repair.
6. Although she did not produce any estimates from builders, Mrs Wanklin told us that a simple repair to the roof tape to stop the leak would have cost £40 to £50, and that if it had been decided to replace the rotted wood near the area of the leak it would have cost about £200. We did not agree with these estimates. In our view, for the reasons in paragraphs 3 to 5 above, the renewal of the woodwork around the glass panes near the leak (and if they broke during the course of removal, the glass panes themselves), the removal of the rotten wood and its replacement and restoration (and also the replacement and restoration of the fibreboard ceiling) would have cost significantly more than this.

The VAT Law

7. Section 30 VATA 1994 provides that supplies of goods or services of the description specified in Schedule 8 are zero rated.
8. So far as material, Group 6 of Schedule 8 specifies the following goods and services:

"Item No….2 the supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect or any person acting as a consultant or in a supervisory capacity."

9. The services which the Appellant maintains are zero rated were services other than those of an architect or a person acting as a consultant, or in a supervisory capacity. The only question for us therefore was whether the services were supplied in the course of an "approved alteration" of a protected building.
10. Note (6) provides that:

""Approved alteration" means…(c) in any other case, works of alteration which may not, … be carried out unless authorised under any provision of -

(i) Part 1 of the Planning (Listed Building 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 the building which results from the carrying out of the repairs, or maintenance work."

11. Note (9) provides:

"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"

12. In Metropole (Folkestone) Ltd v Revenue & Customs [2006] (VATD 19917), we reviewed the legislative provisions since 1972 and a number of decided cases. We summarised that review by drawing a number of principles in relation to the legislation in its current form. We set out those principles in paragraph 26 below:
13. The parties in this appeal were kind enough not to dissent from the conclusions we reached in Metropole, but each drew our attention to cases other than those considered by us in that decision or to particular aspects of cases we had considered. In the remainder of this decision we deal with the arguments advanced on either side and then, in the section "Discussion", set out our reasoning and conclusions.

The Parties' Arguments

14. We were greatly assisted by clear and well argued written submissions from Mrs Wanklin and by the Respondents' skeleton argument and later written reply.
15. In summary Mrs Wanklin makes the following points:

(1) First she says that any element of repair and maintenance was incidental and small. A repair to the leaking joints would have cost between £50 (if it had simply been patched) or £200 (if the affected woodwork had been replaced); the work actually done was quite different.

(2) She notes that something which is incidental to repair and maintenance is treated as repair and maintenance. The converse she says must also be true: an alteration which is not repair and maintenance cannot be changed into repair or maintenance simply because of an incidental benefit of the work done. She says that it cannot even be said that the replacement of the roof would not have been carried out but for the leak: it was illogical to suggest that a whole roof should be replaced just to repair a small leak.

(3) Second, the works done could not be viewed as works "designed by the owner or occupier to minimise, for as long as possible, the need for and future scale and cost of further alteration to the fabric of the building". If a repair to the woodwork would have cost £200, more than 35 similar repairs would have been needed over the lifetime of the old roof , before it could possibly be said that the cost of further alteration to the building would have minimised maintenance costs.

(4) Third, she says that the works were carried out for safety, environmental, and aesthetic reasons rather than to effect any repair.

16. Mrs Wanklin notes that the balcony which was replaced in the Metropole case had to be replaced to maintain the appearance of the building: there was by contrast no urgent need to replace the roof of the corridor.
17. In SH and VS Kain (VATD 12331) the tribunal considered the replacement of a straw thatched roof with reeds and held it was repair or maintenance: the replacement was in the tribunal's words "somewhat better or somewhat more extensive than was strictly necessary". In the case of Haresfield Court the works, she says were significantly more extensive, rather than "somewhat" more extensive.
18. In Windflower Housing Association 1995 STC 860 she noted that the roof was "leaking all over": the logical option for the owners was to replace it to achieve the necessary repair and maintenance. That was significantly different from the facts in this appeal.
19. Mrs Markham referred us to the tribunal's decision in Logmoor Limited (VATD 14733) where, in reliance on Windflower, the tribunal said, in relation to the refurbishment of a roof:

"the new roof was nonetheless a "repair" in that there was substituted for the existing roof a roof of like function and appearance, not so as to amount to an alteration but [ ] a preservation of the structure."

In the case of Haresfield Court the new roof had substantially the same function and outline as the old one. The structure was preserved.

20. Mrs Markham noted the principal stated by the tribunal in Dodson Bros (Thatchers) Ltd (VATD 13734) derived from Windflower and Sutton Housing that:

"if repair or maintenance is needed then any alteration, even if it goes far beyond the work strictly reached to effect the repair, is excluded from zero rating in repair or maintenance."

(Mrs Markham accepted before us, however, that these comments were directed to the situation when the alteration was integral to the repair and maintenance in the sense described in Sutton.)

21. In this case she said repair was needed: the work, undertaken to "modern construction standards" yielded improvements above and beyond the repairs, but that did not affect the nature of the works as repair and maintenance.
22. The listed building consent noted that the works "[would] help to secure the long term use and preservation" of the building. Mr Markham concludes that the district council saw the more serviceable slate type covering as offering maintenance benefits so as to help preserve the building.
23. Mrs Markham says that the alteration of the roof was not "alteration for the sake of alteration". As in SH and VS Kain (VATD 12331) "work of some sort and extent was needed to the covering of the roof. That [the Appellant] chose to do it somewhat better or somewhat more extensively than was strictly necessary does not alter its essential character as repair or maintenance work to put and keep the roof covering in satisfactory condition." She says that even more clearly than as in Windflower the work was an integral part of wider works of repair or maintenance: here there was not even a change in the pitch of the roof.

Discussion

24. It is clear that these works constituted an alteration to Harefield Court, and an alteration which so effected its character that consent for them was required under the Planning (Listed Buildings and Conservation Areas) Act 1990. We have found that such consent was obtained. The principal question for us is therefore were those works "repair or maintenance" of Haresfield Court?
25. We have found this appeal difficult and the mind of at least one of us has fluctuated in the course of our consideration.
26. We start with the principles identified in Metropole:

(i) alteration means any alteration to the building not just a structural alteration;

(ii) repair or maintenance" refers to the listed building as a whole, not to specific parts of it (C & E v Sutton Housing Trust 1984 STC 352);

(iii) because "repair or maintenance" is an exclusion from "alteration" the repairs or maintenance under consideration will always be works of alteration;

(iv) repair or maintenance is a composite phrase to be construed in its ordinary sense; the words are not antitheses (ACT Construction Ltd v Customs and Excise Commissioners 1982 STC 24 the ACT case");

(v) maintenance, if one is to be permitted to consider it separately, reflects a task designed to minimise for as long as possible, the need for and future time scale of further attention to the fabric of the building (Customs and Excise Commissioners v Windflower Housing Association 1995 STC 860);

(vi) a radical and fundamental alteration to the building will not be repairs or maintenance (the ACT case);

(vii) the effecting of a repair using modern building materials does not prevent the work from being repairs and maintenance (Browne v CCE VATD 11388);

(viii) if an alteration is an integral part of wider works of repair and maintenance it should be viewed as repairs or maintenance (Windflower); "integrality" implying a measure of necessity (Nicholas Furra Rhodes VATD 14533).

27. To this we add a further principle: We accept Mrs Wanklin's submissions that an alteration which achieves some measure of repair and maintenance is not thereby necessarily constituted repairs or maintenance. Ognall J said as much in Windflour when approving the example given by Woolf J in St Luke (see p.865 (e) to (h)). We do not understand the tribunal in Dodson to have been saying that any element of repair or maintenance makes the whole work of that character. Almost any alteration of a building will give rise to some feature which will mean less future need of repair as a result of the work. The issue will be one of degree: a repair which is a consequence of a larger change will not turn the change into repair and maintenance; an alteration which is a necessary part of a repair does not prevent the works being repairs or maintenance. Between the two extremes lies a band of possibilities.
28. In favour of the Appellant's case are the following factors:

(a) the replacement of the fibreboard tiles in the ceiling by a normal domestic plaster skimmed ceiling must, from the perspective of the occupier of flat 3, have been quite a significant change which on its own would not have been repair or simply the result of maintenance of the ceiling (rather than the building) or the use of new materials. It would have been an improvement to the passageway;

(b) the previous glass roof was certainly unattractive and would have remained so even if cleaned up and with the benefit of, say, lead flashings rather than metallic tape over the glazing bars;

(c) the works did not replicate the appearance of the old roof - glass was replaced by slate-like material. The internal structure supporting the "slates" was different;

(d) a large part of the roof was not in serious disrepair.

29. In favour of the Respondent's case are the following factors:-

(a) the roof was in need of some repair. The works undertaken dealt with that need;

(b) the new roof fulfilled the same function as the old roof and occupied broadly the same space;

(c) the planning applications showed some reliance on and acceptance of a need for repair. Unattended wooden glazing bars can deteriorate and may in due course leak;

(d) the works needed to effect a proper lasting repair would, in our view, have been substantial.

30. There is no doubt that some repair or maintenance was needed to the roof. It is also clear that what was done went beyond the minimum that was needed to repair the roof. The majority of the roof was dirty but not apparently in serious disrepair. If the leaking end had been repaired, the whole roof cleaned and if it had been possible economically to seal the glazing bars and replace the metallic tape, it would have given some years service. But the glass would have remained unattractive from outside and the tiles from within and the structure would still have been old.
31. These works effected both repair and maintenance and a substantial improvement. The new roof achieved the aesthetic, environmental and safety benefits described by Mrs Wanklin. On balance, however, and for the following reasons we find that they were works of repair and maintenance which effected necessarily or incidentally that improvement (so that the improvement could properly be termed an integral part of the repair or maintenance), rather than works of substantial improvement to which repair and maintenance was incidental.
32. Although it would have been possible to deal with the leak very cheaply by simply covering it up with bitumen and felt, these works did not simply address the need to stop the leak, they also addressed the rot in the timbers and the potential for further deterioration in the metallic tape clad glazing bars. For the reason in paragraphs 3 to 5 above, we think that the natural response of a builder who was asked solely to replace the rotten timber at the hip end of the roof and to repair those parts of the roof which on inspection required to be dealt with would have been to say "this will be no easy job: its going to be cheaper in the long run to replace the whole thing". That replacement of the roof whether in glass or slate would have been repair or maintenance of Haresfield Court.
33. Given the passageway ceiling there was no benefit to be had from a glass roof so the recommended replacement could have been in an opaque covering. The change from glass to the opaque covering was on balance more of a sensible choice for the replacement than the result of a decision to change the roof for the sake of change. It would have been difficult to preserve the existing glass. Although there was a desire to change the roof we find that that change sprang from the need to repair and maintain it, and that that need dominated the nature of the work done. The works were therefore an integral part of the repair.
34. On balance therefore we find that these works were works of repair or maintenance rather than works of substantial change to Haresfield Court which incidentally dealt with a need for repair and maintenance.
35. We turn to consider whether Note (9) should have effect to require an apportionment of the supply. Note (9) applies where "a service is supplied in part in relation to an approved alteration… and in part for other purposes." It contemplates a single supply for VAT purposes which is to be apportioned: it does not deal with separate supplies. The division of the single supply depends upon the "purposes" of the supply. We read that as referring to what objectively viewed, the purpose of the supply rather than the subjective purposes of either the maker or recipient of the supply.
36. If there was a single supply of building services encompassing a number of activities -for example the repainting of windows and the building of an extension - the purpose of each part would be clear and it would be possible to apply Note (9) to provide different results in relation to each part. Can Note (9) be applied to one single activity such as the replacement of a roof so as to apportion between zero rated and standard rated different amounts of the consideration for that activity depending upon the purposes of the supply? That does not seem to us to be the proper construction of Note (9): if there is an approved alteration then even if a purpose of that alteration might be repair and maintenance, it is still an approved alteration, and to the extent the service comprises that work it must all be apportioned to that heading; if what is done is repair or maintenance it means that it is not approved alteration and no apportionment falls to be made.
37. Therefore we cannot treat Note (9) as providing for any dissection of the service supplied.
38. Our decision was unanimous.
39. We award costs to neither party. The decision was finely balanced.

CHARLES HELLIER

CHAIRMAN

RELEASE DATE:27 April 2007

LON/2006/0432