[2010] UKFTT 184

TC00488
VAT – zero-rating – building works to listed building – works to roof – whether alteration – whether repair or maintenance – appeal dismissed

FIRST-TIER TRIBUNAL
TAX

 	
					GGN BUILDERS LTD	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: 	Lady Mitting (Judge)
		Roger Freeston FRICS (Member)
			
Sitting in public in Birmingham on 22 February 2010

James Papps for the Appellant

Julian Winckley, counsel, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2010
DECISION

1.	The decision under appeal is that of the Commissioners contained in a letter dated 10 November 2008 and upheld on reconsideration by letter dated 8 June 2009 that certain works to Holly House, Chetwynd End, Newport, Shropshire did not qualify for zero-rating.  Extensive refurbishment and renovation works were carried out to the property and the Commissioners had accepted that certain other aspects of the work did qualify for zero-rating.  The works in issue before us related to the roof.  The building works were carried out by the Appellant for the owner of Holly House, Mr. James Papps who represented the Appellant before the tribunal.
2.	The roof had not been in a good state of repair, although the extent of the disrepair was not clear and is a matter to which we return below.  In the course of the work, the entire roof covering (felt and slates) was removed but leaving the timber framework in place.  On re-roofing, a modern insulation system was incorporated, there having been no insulation previously.  The issue before the tribunal was whether the roofing work amounted to an approved alteration which would attract zero-rating as contended by the Appellant or, as submitted by the Commissioners, was a work of repair and maintenance so as to be standard-rated.
The law
3.	Group 6 of Schedule 8 to VATA 1994 provides for zero-rating of supplies in relation to ‘protected buildings’.  Item 2 of the said Group 6 allows zero-rating for:
“The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as a consultant or in a supervisory capacity’.
4.	Note (1) to Group 6 defines ‘protected building’ and it is not in dispute that the house is such a building for the purposes of this appeal.
5.	Note (6) to Group 6 defines ‘approved alteration’ and Note (6) (c) is engaged in the present appeal and provides, in terms, for works of alteration to be authorised under certain legislative provisions including Part 1 of the Planning (Listed Buildings and Conservation Areas) Act 1990.  The note goes on to provide that an ‘approved alteration’ does not include any works of ‘repair and maintenance’ or any incidental alteration to the fabric of a building which results from the carrying out of repairs or maintenance work.  It was accepted that the works were carried out with consent.
The building works
6.	Mr. Papps, very fairly, admitted at the outset that in building terms he was a layman and there was very little evidence before us as to exactly how damaged the roof had originally been or how extensive an operation it was to fit the insulating material.  We had in front of us a copy of the tender document but this gave very little information.  It referred to preliminary condition surveys of the roof having been carried out but they were not before us.  There was reference to a meeting having to be arranged with various experts including a timber specialist, an architect and a structural engineer, the purpose of which was stated to be “to re-survey, discuss and agree the extent of the remedial work necessary to the exposed roof structure”.  Under the section “replacement roof covering”, the text read “the roof shall be re-slated re-using the existing saved slates on battens, on a breathable roofing under-slating felt on counter battens on over rafter insulation”.  No separate sum was attached to this section.
7.	Mr. Papps told us that the roof was not in fact in a particularly bad state of repair.  It had not been leaking.  Some of the slates were in a poor condition but all that would have been necessary was to have removed those individual slates and replaced them with new ones.  In fact Mr. Papps told us that almost all the slates could be re-used.  Had the intention been to merely repair the roof, nothing further would have needed to have been done.
8.	However, as Holly House had not previously had any form of insulation, it was Mr. Papps’ intention to insulate the house.  The purpose of adding the insulation was to promote the energy efficiency of the building and enhance its enjoyment as a home.  To this end, Mr. Papps told us that the entire roof covering was removed and a “hot roof” insulating system incorporated on the re-covering.  Mr. Papps was not entirely clear but we understand that the insulating material came in sheets which sat below the felt and the tiles but followed the shape of the roof.  We were not shown any sample or photograph of the material and Mr. Papps, who had not seen it in any detail, was unable to describe it to us.  An alternative and less invasive form of insulation would have been a cold roof system whereby the sheeting merely lay across the base of the roof.
9.	The only further evidence as to the state of the roof and the works carried out is to be found in the correspondence from the Appellant to the Commissioners and a letter from Mr. Papps to the Commissioners.  The Appellant wrote on 7 October 2008 in the following terms:
“Specifically with regard to the changes to the roof, we planned the alterations in consultation with architect, Peter J Frith BA (Hons) Dip Arch (Birm) R.I.B.A Chartered Architect of Frith Williams in Newport and with Mr Jon Fox, the Local Authority conservation officer in Telford & Wrekin.  We are advised that it was possible to do a partial repair which would have minimised the need for further attention to the fabric of the building as envisaged by paragraph 9.3.1.  However, on further advice from our architect, we chose to carry out much more extensive changes, involving completely removing and replacing the entire roof, negating as opposed to minimising, the need for further work of this type.
Furthermore our decision to carry out this more extensive change was to enable us to fit over rafter insulation (TRI-ISO SUPER9) to create a ‘warm’ roof rather than a ‘cold’ roof which the architect advised would be better for the structure of the building.  In particular for a ‘cold’ roof, we would (sic) advised that we would have had to introduce eaves ventilation to prevent condensation in the roof space, which would have been difficult to achieve given the existing design of the roof (valley in the middle).  At the time there was also no access to the roof space and headroom was limited, reducing workspace and potentially causing damage to the ceilings had insulation been put under the rafter.  Such insulation would have also prevented access to ceilings at a future date.  In our view, the scale of this work to the roof constitutes a ‘meaningful’ change, and therefore an alteration.’
By letter dated 28 August 2009, Mr. Papps wrote in, his letter stating “we understand however, that the roof was in a poor state of repair and had no system of insulation.  This was the reason for the approved work”.  In his letter he goes on to say “as to a “partial repair”, we understand that there was the possibility of replacing certain parts only of the roof.  This would not have maximised the life of the building and, furthermore, would not have allowed for the installation of the specialist roof insulation system which formed a key part of the work”.
Case law
10.	We were referred by the parties to the following cases:
		Customs and Excise Commissioners v Sutton Housing Trust 1984 STC 352
Customs and Excise Commissioners v Windflower Housing Association 1995 STC 860
Dobson Brothers (Thatchers) v Customs and Excise Commissioners 13734
Carr & Martin v Customs and Excise Commissioners 19267

The Appellant’s submissions
11.	Mr. Papps referred us to the Commissioners’ Notice 708 which in paragraph 9.3 seeks to distinguish between alterations and repair and maintenance.  The Notice describes a building as being altered when “its fabric such as … roof … is changed in a meaningful way”.  It was Mr. Papps’ submission that the new insulation system constituted a change to the fabric and structure of the building and that the works were “meaningful”.  If it had not been his intention to have an insulation system fitted, the roof would never have been removed in the first place, the repair which would have been done, being the minimal removal and replacement of a few slates.  The purpose of the works was to fit an insulation system, not to repair the roof.
12.	Mr. Papps relied on the cases of Dobson Brothers and Carr & Martin.  In Dobson Brothers, a thatched roof which was not in need of repair was completely removed so that a fire shield could be installed and was then replaced.  The tribunal held this to have been an approved alteration.  In Carr & Martin, the tribunal again found for the Appellant.  In this case a similar insulation system to that used on Holly House was installed in the walls of the property.
The Respondents’ contentions
13.	It was Mr. Winckley’s contention that the works constituted repair and maintenance.  Mr. Winckley contend that the nature of the work was to repair and insulate the roof and that properly construed this can only be repair and maintenance.  He contended that the scale of the work alone could not convert repair and maintenance into an alteration.  Weight also had to be attached to the fact that the re-roofing here was done with an eye to the future.
Conclusions
14.	The first issue to be addressed it to try and identify what precisely was the nature of the work being undertaken.  Without for one moment blaming Mr. Papps, he was unable to describe or evidence with any degree of clarity the nature and extent of the work undertaken.  We have had to fall back on the documents before us, namely the tender document and the correspondence.  Not only do these documents conflict with Mr. Papps’ oral evidence but they also appear to be contradictory within themselves.  The one thing that does come out of both the tender document and the correspondence is that the roof was in a far greater state of disrepair than Mr. Papps had thought.  Everything points to there being much more wrong than a few damaged slates which could just be taken off and replaced.  The tender document implies this.  The correspondence expresses it.  The Appellant refers in its correspondence to the need for partial repair.  Far more explicitly, Mr. Papps refers to the roof being in a “poor state of repair” and he further defines the “partial repair” as “the possibility of replacing certain parts only of the roof”.  The impression we get is that what would have been needed to reinstate the roof was considerably more than the replacement of a few tiles but rather less than the removal of the entire roof.
15.	The question then arises as to why the more extensive and “meaningful” work was carried out.  Mr. Papps was in no doubt that the sole purpose was to install the insulation.  However again this does not sit easily with the correspondence which quite clearly states that the architect advised the more extensive changes “involving removing and replacing the entire roof, negating as opposed to minimising, the need for further work of this type”.  This clearly implies the aim was to do a once-and-for-all repair of the roof thus making it good and sound for many years to come.  This same letter however then goes on to say that the decision was made in order to fit the insulation.  The answer may well be that the removal of the entire roof was dual purpose.  It would provide a good and sound roof for many years to come and would also allow the insulation to be fitted.
16.	We believe that the inherent character of the work being carried out was that of repair and maintenance.  This first and foremost was a repair and maintenance project.  The roof was damaged and needed repairing.  A rather more extensive repair was carried out for the dual purpose of protecting and maintaining the roof and to fit the insulation, but that dual purpose cannot promote the essential nature of the works into one of alteration.
17.	As in Windflower, we see the fitting of the insulation into the roof covering as “an integral part of wider works of repair or maintenance”.  It was accepted by counsel for the Appellant in Windflower that “the concept of maintenance reflects a task designed by the owner or occupier to minimise, for as long as possible, the need for, and future scale and cost of further attention to the fabric of the building…”.  This again is, we believe, what we have here.
18.	All cases of this nature depend on their own facts and very few cases would ever be on all fours with each other.  In Carr & Martin, although the nature of the insulation being installed was the same, the tribunal rejected the contention that the work was to preserve and protect the walls but found that it was “entirely new work”.  A much greater distinction can be found in Dobson Brothers.  In that case, the tribunal chairman, Dr. Avery Jones, analysed the cases of Windflower Housing and Sutton Housing Trust  and derived the following principle, “if repair or maintenance is needed then any alteration, even if it goes far beyond the work strictly needed to effect the repair, is excluded from zero-rating as repair or maintenance”.  This would appear to us to describe what the Appellant has done to Holly House.  Repair was needed and at the same time the opportunity was taken to install the insulating layer in the roof re-covering.  Dr. Avery Jones goes on to say, and this is where the real distinction lies,
“Applying the principle to this case, the roof was not in need of repair or maintenance, although it could be expected to be in need of replacing the top layer within the next five years.  There was no need to do any work at the time except for some minor work to the netting.  The real reason for the work had nothing to do with repair or maintenance but was the installation of the fire barrier…”
In Dobson Brothers therefore the only work which needed to be done was some minor work to the netting.  As we have already found, we believe that far greater remedial work was needed to the roof in Holly House.
19.	An alternative argument, implicit in Mr. Papps’ submissions was that the installation of insulation is in itself an alteration, his argument being that the roof was altered in a meaningful way.  We reject this contention.  The roof was not altered in any meaningful way at all.  The structure of the roof remained exactly as it always had been.  What was done was, on the re-covering, insulated sheets were inserted between the tiles and the felt.  We do not see this as an alteration to the fabric of the roof or any part of the building.  It would certainly promote the energy efficiency of the building and enhance its enjoyment as a home but that does not automatically mean that it is an alteration to the fabric.  Mr. Papps was unclear how the insulating material was attached but there was no evidence that it involved any structural alterations.
20.	For all these reasons we reject the Appellant’s contention that the roofing works were works of alteration.  We find that the work to the roof was repair and maintenance and as such falls to be standard-rated.  The appeal is therefore dismissed.  The Commissioners made no application for costs and no order is made.
21.	The Appellant has a right to apply for permission to appeal against this decision in accordance with rule 39 of the Rules.  The parties are referred to “Guidance to accompany a decision from the First-Tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.
TC/2009/11495

LADY MITTING
JUDGE
Release Date: 23 April 2010