United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2008] UKVAT V20700

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Anthony Jessop Price & Kay Price v Revenue & Customs [2008] UKVAT V20700 (04 June 2008)

20700

VAT – DIY BUILDERS SCHEME – Appellant received supplies of granite blocks and haulage services – VAT refund refused on the supplies of haulage services – satisfied that haulage services were separate supplies of services – Appellant not entitled to a refund of VAT on supplies of services – Appeal dismissed

LONDON TRIBUNAL CENTRE

ANTHONY JESSOP PRICE & KAY PRICE Appellants

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

JOHN BROWN CBE FCA ATII (Member)

Sitting in public in London on 24 April 2008

Anthony Jessop Price appeared for the Appellants

Mario Angolini, counsel instructed by the Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

The Appeal

The Appellants were appealing against the Respondents' decision dated 29 March 2007 refusing to refund VAT on three invoices in the sum of £910 submitted as part of a Do it Yourself (DIY) Builders' Scheme claim under section 35 of the VAT Act 1994.

The disputed invoices concerned supplies for the haulage of granite blocks from Nanhoron granite quarry to Peaslake, Guildford by W.M. O'Grady Limited.

The Dispute

There was no dispute between the parties on the facts of the case. The Appellants as private individuals constructed a dwelling known as Fulvens Hangar at Peaslake. On completion of construction they were entitled under the DIY Builders' Scheme to make a claim for a refund of VAT on building materials incorporated in the building or its site. The Respondents met the Appellants' claim except the VAT on the haulage of granite blocks from Nanhoron quarry. The Respondents accepted that the granite blocks constituted building materials because they were incorporated on the site to retain soil which maintained the structural integrity of the dwelling. The Respondents refunded the VAT on the supplies of granite blocks by Nanhoron quarry but not the VAT on their haulage which was carried out by a contractor and invoiced separately from the supplies of granite blocks.

The Respondents' case was that they were only permitted to refund VAT on supplies of goods under the legislation governing the DIY Builders' Scheme. The haulage of the granite blocks constituted a supply of services, which did not qualify for a VAT refund under the legislation. The Respondents conceded they would refund VAT on haulage if such services were made by the same person who supplied the building materials, and in consequence issued a single invoice for the supply and delivery of the materials. In this Appeal the respective supplies of building materials and their delivery were carried out and invoiced separately by distinct legal entities.

The Appellants submitted detailed grounds of Appeal contesting the Respondents' decision which can be categorised under two broad headings:

(1) The Respondents' refusal was not supported by their advice on the DIY Builders' Scheme published in VAT Notice 719.

(2) The haulage costs were an integral component of the building materials incorporated in the dwelling. In those circumstances the VAT on haulage costs should be regarded as part of the claim for a refund of the VAT on building materials.

The question for determination was whether the Appellants were eligible under section 35 of the VAT Act 1994 for a refund of the VAT incurred on the haulage of the granite blocks which was invoiced separately from the supply of granite blocks and performed by a different supplier.

The Legislation

Section 35(1) of the VAT Act 1994 provides as follows:

(1) Where –

(a) a person carries out works 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.

The Evidence

The bundle of documents was admitted in evidence. No witnesses were called by the parties. We heard submissions from each of the parties.

Reasons

Section 35 of the VAT Act 1994 permits the refund of VAT incurred on a supply of goods used for the purposes of relevant construction works. The haulage of the granite blocks by W.M. O'Grady Limited was a supply of services which on the face of it did not meet the eligibility requirements for a VAT refund. The Appellants sought to dissuade us from reaching that conclusion.

First they argued that we should base our decision on the Respondents' interpretation of the law relating to the DIY Builders' Scheme as set out in VAT Public Notice 719 (May 2002 edition). According to the Appellants, Notice 719 had been carefully prepared by Government to provide a plain man's guide to the legislative requirements of the DIY Builders' Scheme and its interpretation of the requirements should be preferred to that in the Respondents' internal guidance on the Scheme^[1]. The Appellants relied on the advice given in Notice 719 when they chose Nanhoron quarry to supply the granite blocks instead of larger quarries which provided an inclusive delivery service. The Appellants considered that the Respondents with their refusal to refund the VAT on the haulage services were effectively disowning Notice 719 and causing the Appellants to incur unnecessary costs.

The Appellants pointed out that Notice 719 was silent on the issue of transportation of building materials which were to be incorporated in the new building. The general prohibition on claims for VAT on services in paragraph 9.2 was directed at on-site services connected with building materials already delivered. Notice 719 explained that the purpose of the legislation was to put DIY builders in a similar position to a developer selling a zero-rated property by refunding them the VAT on their main construction costs. In the Appellants' view the haulage costs formed part of their construction costs of the new dwelling and that the refund of the VAT incurred on those costs was consistent with the legislative purpose as stated by Notice 719. Further Notice 719 did not expressly prohibit a refund of VAT charged on the delivery of building materials. In all the circumstances the Appellants submitted that the contents of Notice 719 supported their claim for a VAT refund.

The Appellants' second category of arguments was based on the proposition that delivery charges were an integral part of the costs of building materials. The Appellants contended that the Respondents' rationale for refunding VAT on the supply of granite blocks but not on their delivery was illogical because the blocks could not be incorporated on the building site unless they were delivered. The Respondents' decision to treat the granite blocks as building materials eligible for VAT refund only made sense if their supply included the delivery costs. The Appellants considered that in reality the supplies of the granite blocks and their delivery from Nanhoron quarry were made by the same person. The signature acknowledging receipt of payment of the separate invoices for the supplies of granite blocks and their delivery appeared to be the same. Finally the Appellants submitted that by treating the delivery costs as part of overall costs for building materials it ensured that the eligibility for a VAT refund on delivery charges was not dependent upon the capability of individual quarries to make its own deliveries.

In assessing the Appellant's eligibility for a refund of VAT on delivery charges we are concerned with the wording of section 35 of the VAT Act 1994 not the advice given by the Respondents in their public notices unless the notice has force of law which was not the case with Notice 719. In our view the wording of section 35(1)(c) is unambiguous in that the Appellant was not entitled to a refund of VAT on a supply of services. On the facts agreed we find that the supplies of haulage of the granite blocks by W.M. O'Grady Limited were supplies of services. Thus the Appellants were not entitled to a refund of the VAT incurred on the haulage supplies unless they could demonstrate that the supplies of haulage and of granite blocks constituted single supplies of goods for VAT purposes. In this respect the Appellants mounted an ingenious argument based upon the notion that the granite blocks were not building materials unless they were delivered on site. The question whether multiple supplies comprise one supply for VAT purposes is determined by the essential features of the transactions not by an analysis of the meaning of building materials. The decisive features of the transactions in this Appeal were that the Appellants contracted for separate supplies of granite blocks and haulage services which were made by different legal persons and evidenced by separate invoices. The Appellant's contention that in reality one person made both supplies was not supported by the evidence. Their evidence of the similarities between the signatures on the invoices was outweighed by the facts that they contracted with separate legal entities to provide the respective supplies of granite blocks and haulage services and the issue of two invoices in the names of the suppliers. We, therefore, find that the Appellant received separate supplies of granite blocks and haulage services.

Decision

We find that the haulage of granite blocks from Nanhoron granite quarry to Peaslake, Guildford by W.M. O'Grady Limited constituted separate supplies of services. In view of our finding the Appellants were not eligible under section 35 of the VAT Act 1994 for a refund of the VAT incurred on the haulage of the granite blocks. We, therefore, dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY OBE

CHAIRMAN

RELEASE DATE: 4 June 2008

LON 2007/1012

Note 1 The internal guidance is accessed on the Respondents’ website. The relevant guidance to this Appeal is found at paragraph 22.9.5 V1-8A which stated that “separate invoices for transport or delivery are not eligible for refund”. [Back]