[2010] UKFTT 242 (TC)

TC00539

Appeal number: TC/2009/10160

Appeal against HMRC’s decision to refuse a claim for a refund under Section 35 of the VAT Act 1994- the DIY refund scheme- on the grounds that the Appellants’ property was ineligible for such refund as they did not fall within the section

FIRST-TIER TRIBUNAL

TAX 

	SAM BOND & SARAH BAXTER	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: S.M.G.RADFORD (TRIBUNAL JUDGE)							A.REDSTON			

Sitting in public at 45 Bedford Square, London WC1 on 4 March 2010

Mr. K. Conway of King and Spalding for the Appellant

Mr. R. Smith, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	The Appellants appeal against the decision of HMRC dated 8 April 2009 which upheld their earlier decision dated 4 March 2009 that their claim for a refund pursuant to Section 35 of the Value Added Tax Act 1994 (as amended) (“VATA 1994”)  in relation to their flat is ineligible under the DIY Refund Scheme.
2.	The Appellants’ VAT was incurred on works effecting the residential conversion of a flat at 604 Block B, the Jam Factory, 27 Green Walk, London SE1 4TX (“the flat”).
3.	The basis of HMRC’s decision to refuse the Appellants’ claim for a refund was that the works were not carried out lawfully because the entire development at the Jam Factory was without the benefit of planning permission at the time the works were done and that therefore the works did not constitute a residential conversion for the purposes of VATA 1994. As a result the Appellants had no entitlement to a refund under Section 35 of VATA 1994.
Background and Facts
4.	In September 2000 Southwark Borough Council (“the Council”) granted planning permission for the development of the site of the former Hartley’s jam factory in Bermondsey following an application by Angel Property Limited (“the developer”). This grant of permission specified that three blocks within the Jam Factory (A, B and C) would be converted for residential use with two additional stories built on each and two further blocks (D and E) would be demolished and rebuilt. In all five blocks were to provide 154 residential units and 8,828 square metres of business and live/work space with 159 parking spaces.
5.	The developer had converted blocks A, B and C into flats and rebuilt block D by some point in 2005. However it did not do so within the terms of the planning permission which had been granted and in the planning report of the Council dated 16 October 2007 it stated that the development was inconsistent with the planning permission in the following respects:
•	A total of 171 private units were constructed within blocks A, B, C and D instead of 154 units in blocks A to E;
•	Block E had not been constructed;
•	Block D had been erected to a different form and external appearance;
•	The elevations of blocks A, B and C did not accord with the approved drawings in a number of respects;
•	The amount of live/work space stipulated in the planning permission had not been provided;
•	Affordable housing had not been provided in accordance with the agreement pursuant to Section 106 of the Town and Country Planning Act 1990 which was attached to the September 2000 planning permission.
6.	The planning authority concluded that blocks A, B and C did not have the benefit of planning permission in the form in which they had been constructed and therefore required the developer to make an application for retrospective planning permission. This was granted on 17 March 2008.
7.	The Appellants purchased a leasehold interest in the flat for a period of 999 years on 15 August 2003. The flat at this point was a bare shell. The Appellants produced to the Council their proposals for the fit out of the flat and after some discussion the fit out was approved by the Council. The Appellants then carried out or commissioned works to fit out the flat. None of the works carried out by the Appellants, or by subcontractors on their behalf, were in breach of the planning permission granted to the development in September 2000. The vast majority of the work carried out by the Appellants was completed before the planning report of the Council was issued in November 2007. This was not a public report and we set out at paragraph 56 our findings on when the Appellants became aware of this report.
8.	After the work on the fit out of the flat was completed the Appellants were issued with a certificate of completion by the Council on 25 November 2008 stating that the work had been completed in compliance with the building regulations. The Appellants’ claim for a refund of £12,804.24 was with respect to the VAT incurred on the works done to fit out the flat and was submitted on 27 November 2008. The accompanying letter from the Appellants explained that the application to Southwark Council was for approval that the unit satisfied the appropriate building standards and indicated that a planning application was not required for the type of works carried out.
9.	On 8 December 2008 the Appellants called the HMRC DIY processing team to say that everything had been contained within the planning permission which he had sent to them. Their neighbour had already made a successful claim which they had used as a template for their own and the same planning permission had been accepted. He confirmed that there were no external elevation plans as it was originally a jam factory and externally it had not been altered.
10.	In January 2009 enquiries carried out by the DIY processing team revealed that the planning permission held by them had not been implemented and another planning permission had been applied for with its own legal agreement. This had not been signed. On contacting the planning department at Southwark Council to request the new planning permission and new Section 106 agreement, Officer Daley of the DIY processing team was informed that these were in the process of being signed.
11.	On 4 March 2009 Officer Daley issued a letter to the Appellants informing them that their claim was ineligible under the scheme. In order to be eligible certain conditions must be met, one of which was that the work had been carried out in accordance with the planning requirements. A copy of the relevant section of the Planning Officer’s report was enclosed with her letter. Inter alia it stated “ It was concluded that Blocks A, B and C did not in fact have the benefit of planning permission in the form in which they had been constructed”.
12.	On 4 March 2009 the Appellants sent Officer Daley a letter enclosing the planning permission and indicating that they had had verbal communication from the Council that the planning consent was in addition to the original permission. This planning permission was dated 27 February 2009 and allowed a retrospective planning application to retain three refurbished and extended buildings which included Block B containing the Appellants’ unit.
13.	On 25 March 2009 the Appellants appealed the decision that their claim remained ineligible despite the retrospective permission. The appeal was on the grounds that their build was lawful at all times in accordance with Section 35(1) of VATA 1994. Their works were limited to Flat 604 Block B which was completed in accordance with the original planning permission.
14.	On 8 April 2009 the Appellants were notified that the HMRC decision was upheld. Retrospective planning permission did not change the eligibility of their claim as they needed to have consent at the time the works were being undertaken. The report from the Council dated 5 October 2007 confirmed that the developer did not have the required permission and as a result the development had not been lawfully implemented in accordance with the September 2000 permission.
The Law
15. Section 35 VATA 1994 as amended by the Finance Act 1996 states:
Refunds in connection with construction and conversion 
(1) For subsection (1) of section 35 of the Value Added Tax Act 1994 (refund of VAT to persons constructing certain buildings) there shall be substituted the following subsections— 
“(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.
(1A) The works to which this section applies are— 
(a) the construction of a building designed as a dwelling or number of dwellings; 
(b) the construction of a building for use solely for a relevant residential purpose or relevant charitable purpose; and 
(c) a residential conversion. 
(1B) For the purposes of this section goods shall be treated as used for the purposes of works to which this section applies by the person carrying out the works in so far only as they are building materials which, in the course of the works, are incorporated in the building in question or its site. 
(1C) Where— 
(a) a person (“the relevant person”) carries out a residential conversion by arranging for any of the work of the conversion to be done by another (“a contractor”), 
(b) the relevant person’s carrying out of the conversion is lawful and otherwise than in the course or furtherance of any business, 
(c) the contractor is not acting as an architect, surveyor or consultant or in a supervisory capacity, and 
(d) VAT is chargeable on services consisting in the work done by the contractor, 
the Commissioners shall, on a claim made in that behalf, refund to the relevant person the amount of VAT so chargeable.
(1D) For the purposes of this section works constitute a residential conversion to the extent that they consist in the conversion of a non-residential building, or a non-residential part of a building, into— 
(a) a building designed as a dwelling or a number of dwellings; 
(b) a building intended for use solely for a relevant residential purpose; or 
(c) anything which would fall within paragraph (a) or (b) above if different parts of a building were treated as separate buildings.”

16.	 Section 35 of VATA 1994 as above makes provision for individuals who may not be registered for VAT to be able to reclaim VAT incurred, on certain construction works on their own property for non business reasons, that they would otherwise have to pay.
17.	Section 35(4) provides that the notes to Group 5 of Schedule 8 to VATA 1994  (“Group 5”) apply when construing Section 35. Note 2 to Group 5 sets four conditions which must be complied with in order for a building to be designated a dwelling or a number of dwellings and so fall within Section 35(1D). There was no dispute that the flat satisfied the first three of these conditions.  The fourth condition at Note 2 (d) is that “Statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent”
Appellants’ submissions
18.	The flat was built in accordance with the relevant planning permission granted on 4 September 2000 and as confirmed in the report of the London Borough of Southwark dated 16 October 2007 which stated at paragraph 155 that “The most striking aspects of the main blocks are the large glazed roof extensions. However these were approved and implemented by way of the 2000 consent and the unapproved alterations to the external appearance are very small in the overall context.”
19.	Mr Conway for the Appellants submitted that HMRC should have accepted this as evidence that the planning consent had not been breached in respect of the flat, and that the Respondents had been wrong to rely, instead on the statement contained in paragraph 46 of that report which said that “It was concluded that Blocks A, B and C did not in fact have the benefit of planning permission in the form in which they have been constructed”.
20.	He argued that the 2000 consent and the planning report made a distinction between the different blocks known as Blocks A, B and C, the two additional storeys to each and other demolition and works.
21.	The 2000 consent was for the “conversion of Blocks A, B and C with two additional storeys to each; demolition of Blocks D and E and the construction of two four storey buildings; all to provide 154 residential units and 8,824 square metres of business and live/work space with 159 parking spaces.
22.	His submission was that the Appellants’ flat was part of the roof extensions and the planning report referred to the roof extensions as having been approved and implemented by way of the 2000 consent but that it was Blocks A, B and C which did not have the benefit of planning permission because of the way in which they had been constructed.
23.	In the alternative Mr Conway submitted that even if the reference to Blocks A, B and C should be read as including the roof extensions and thus the Appellants’ flat Section 75 of the Town and Country Act 1990 (as amended) (“TCPA”) stated that planning permission enures “for the benefit of the land and all persons who have an interest in it”. The planning permission had not been revoked or modified.
24.	The Appellants’ flat had been constructed in accordance with the planning permission according to the planning report. Immaterial changes to the external appearances as referred to in paragraph 155 of the planning report do not require planning permission as stated at Section 55(2)(a)(ii) of the TCPA:
“works which….do not materially affect the external appearance of the building, shall not be taken for the purposes of the Planning Act 1990 to constitute development and as such planning permission is not required, as planning permission is only required for development”
25.	Mr Conway submitted that furthermore internal works to a private dwelling do not require planning permission as stated at Section 55(2)(a)(i) TCPA:
“the carrying out for the maintenance, improvement or other alteration of any building or works which – affect only the interior of the building”
26.	The term “development” under Section 55(1) TCPA applies for the purposes of the whole TCPA subject to the remaining provisions of Section 55 or where the context so requires and thus the interpretation of Davis J in Cardiff County Council v National Assembly of Wales [2006] EWHC 1412 (Admin) applies for the purposes of Section 171A TCPA as there is nothing in the context to require a different meaning. On this basis the “development” which must be lawful for the purposes of Section 35 VATA1994 is the flat and not the whole site comprising the former jam factory.
27.	In considering whether there has been a breach of planning permission it is necessary to look at the terms of the conditions and limitations breached. These were listed in summary at paragraph 44 of the planning report but none of them affected the Appellants’ flat directly.
28.	On the basis of paragraph 155 of the 2007 planning report the planning authority could not have taken any action against the Appellants in respect of their work done or their use of their flat.
29.	Mr Conway concluded by saying that HMRC had no statutory authority to reach a different conclusion to the planning authority.
30.	Although HMRC had directed the Appellants to the case of AE & JM Harris this case was easily distinguished as in that case the claimants had wilfully and consciously carried out unlawful works over which they had complete control. The Appellants were completely unaware that the developer had breached the original planning permission in other areas of the development outside their control.
31.	Mr Conway stated that on the basis of the decision in the case of Cardiff County Council v National Assembly for Wales he understood that once part of the development had been completed in accordance with planning permission, the failure for the rest of the development to be completed in accordance with that planning permission does not affect the part of the property that has been developed and completed in accordance with the permission.
32.	Mr Conway stated that at no time before the Appellants started work on the flat or before that work was completed did Southwark Council issue them with a notice that they had changed their view as to whether the flat had planning permission. He submitted that on the basis of the High Court decision in Toni & Guy (South) Limited and another v London Borough of Hammersmith and Fulham [2009] EWHC 203 (Admin) they would not in fact have been entitled to serve a notice on them. In that case Williams J stated:
“As a matter of interpretation, in my judgement, the land in respect of which an owner and occupier may be served with a notice under subsection (1) [of Section 215 of TCPA] must be the same as the land in relation to which remedial works are to be carried out by virtue of subsection (2).”
33. The Appellants had learnt from other residents in the Jam Factory how to make their claim and used the application form of one of their neighbours who had been successful in his claim for a refund, as a guide.
34.	The Appellants were able to point specifically to other Jam Factory residents who were in the identical position as the Appellants but had been successful in their application for a refund of the VAT. 
35.	Under the terms of the Appellants’ contract with the developer, the developer agreed to develop the Jam Factory in accordance with the relevant planning permission. HMRC seemed to have accepted the position regards other residents of the development in refunding them VAT under the DIY Builders and Converters Refund Scheme. Although HMRC had stated that they could not comment on such matters due to confidentiality, those residents had told the Appellants that they had been successful in their claims for VAT refunds, provided copies of their correspondence with HMRC and waived their right to confidentiality.
36.	Mr Conway argued that HMRC had unfairly hidden behind the privacy of the other taxpayers in order to ignore whether they were identical to the Appellants in law or perception. He contended that HMRC were unwilling to look at the other applicants and take their treatment of these other applicants into consideration when deciding the Appellants’ case.
37.	Once these other cases had been pointed out to HMRC, HMRC should have looked at them to see whether they were identical in perception. Failing to even consider the other cases in which a refund was given was an abuse of power by HMRC. In British Sky Broadcasting Group PLC v Commissioners of Customs and Excise [2001] EWHCC Admin 127 Elias J stated at paragraph 14:
“In my judgement it ought to be an essential element of any allegation of unfairness based on different treatment that the authorities either knew of, or at any rate plainly ought to have been aware of, the alleged disparate treatment relied on”.
38.	Furthermore, the decisions in Toni & Guy and Cardiff County Council showed clearly that, where parties have different interests in the land, a distinction should be made between these different parts of the land, and HMRC had failed to make any such distinction.  The flats were built in accordance with the planning permission, the breaches were by others. 
39.	 The planning authority had no cause of action but to go against the owners of the development and the occupiers of the flats which were in breach. The Council could not have issued a notice compelling the Appellants to comply with the September 2000 permission.
40.	The breaches however did not affect the Appellants’ flat and their flat had been completed in accordance with the original planning permission.
HMRC’s submissions
41.	Mr Smith for HMRC submitted that as the planning authority had concluded that Blocks A, B and C did not have the benefit of planning permission as constructed and required the developer to make a completely new application for retrospective planning permission which was granted on 17 March 2008, it followed that the developer did not have permission to develop any of the Jam Factory in the way it did prior to 17 March 2008.
42.	In order to make a valid claim under Section 35 VATA 1994, the Appellants had to satisfy the following conditions:
•	The work which they carried out had to be work to which Section 35 applied;
•	The only potential category of work to which Section 35 applied under which the Appellants could claim was residential conversion;
•	The work carried out on their flat by contractors could only give rise to a claim if it was work of residential conversion;
•	Works will constitute residential conversion only to the extent that they consist in the conversion of a non-residential building, or part thereof, into a building designed as a dwelling or a number of dwellings;
•	A building will only be designed as a dwelling if planning consent has been granted and its construction and conversion has been carried out in accordance with that consent.
43.	Mr Smith submitted that in this case it was clear that the Jam Factory as a whole and Block B in particular, did not have the benefit of statutory planning consent for the way in which it was constructed. The Appellants’ flat was within Block B. Planning permission was required in order to convert any part of the Jam Factory to residential use and therefore any and all flats within the development were constructed without planning permission.
44.	The flat therefore was not a building designed as a dwelling for the purposes of VATA 1994 and the works done to it were not works of residential conversion, hence the works were not works to which Section 35 applied.
45.	Alternatively Mr Smith submitted that in the absence of valid planning permission for the works which were done to the Jam Factory, any works done to the flat were unlawful and so the Appellants’ claim fell foul of Section 35(1)(b) of VATA 1994.
46.	In either case the Appellants had no valid claim under Section 35. Furthermore, HMRC argued that Section 35 is permissive and exceptional in the framework of VAT, and under general law such exceptions to be interpreted restrictively.  
47.	Insofar as the Appellants argued that planning permission had been subsequently granted for the development, Mr Smith stated that in the case of A.E & J.M.Harris the Tribunal had concluded that:
“any relevant conditions have to be satisfied at the time of the design of the building (that is at the date of the planning consent) and not later. We are confirmed in our view by the fact that if a later planning consent could fulfil the condition, then in theory a claim for a refund could be made many years after the completion of the building which could not have been intended.”
48.	Although that decision specifically concerned the construction of Note 2(c) to Group 5 Mr Smith contended that its reasoning applied equally to Note 2 as a whole and more specifically to Note 2(d). This note expressly requires that planning consent has been granted and that the work has been carried out in accordance with that consent for the building to be designed as a dwelling. It was plain in this case that no planning consent had been granted for the construction/conversion of the Jam Factory as a residential building in the way it was done at the time that the Appellants carried out their works to the flat. The planning permission granted was not complied with by the developer and so was not operative for the purposes of permitting any works at the Jam Factory as a whole.
49.	Although the Appellants had sought to draw a distinction between the flat and the development as a whole, stating that while there were aspects of the development which fell outside the approval and flats, such as the Appellants’, which fell within it,   Mr Smith submitted that once planning permission had been granted for a certain development, if the development works were not carried out fully in accordance with the permission the whole development was unlawful. He quoted Lord Denning M.R. in Garland v Minister of Housing and Local Government and anor:
“when there is a difference in substance [between the permission granted and the work done], then the whole is done without any permission at all.”
50.	Although Mr Conway had suggested that paragraph 155 of the planning report confirmed his view that the glazed roof extensions in which the flat is contained had planning permission, Mr Smith contended that this was wrong in law having considered the authorities to which he had earlier referred. Reading the report as a whole the planning officer had made clear at paragraph 47 that a retrospective application for planning permission was required in respect of the whole development not just parts of it, meaning that no part of it could claim the benefit of the September 2000 permission.
51.	The decision in Cardiff County Court v National Assembly for Wales did not assist the Appellants as in that case there had been no part of the development which was inconsistent with the original consent.
52.	As to the unfairness claim Mr Smith submitted that even if the Appellants were correct in their submission that refunds had been paid to other owners of flats within the Jam Factory, providing that HMRC are correct in their analysis of the law and the facts, the Appellants were seeking a refund which HMRC was not lawfully permitted to make just because it had been made to others.
53.	If HMRC had paid refunds to the Appellants neighbours in the Jam Factory following claims made on exactly the same basis as that of the Appellants then such refunds had been made in error.
54.	As Jacob J stated in CEC v National Westminster Bank plc [2003] STC 1072:
“Just because a tax gatherer makes a blunder which favours some taxpayers by way of a windfall does not mean that he should perpetuate the blunder in favour of others, a number of wrongs do not necessarily make a right. The interests of the general community are involved – taxpayers collectively have an interest that tax properly due should be collected and that there should not be repayments to people who are not entitled to them.”

Findings
55.	On the facts, all the work the Appellants carried out was in accordance with the planning permission originally granted, and there was thus no requirement for retrospective consent in relation to the works on their flat.  
56.	HMRC stated that the Appellants “should have been aware” of the dispute over planning permission between the Council and the developer during this period. However, we were provided with no evidence that they had this knowledge at any time before completion of the works carried out at the flat. We therefore find that the Appellants not only carried out the works on their flat in accordance with the planning permission, but that they were unaware of the withdrawal of that permission until after they had completed those works. We accept that application for retrospective consent was also not accepted by the Council until after the completion of the works on their flat. 
57.	The Appellants submitted that other flat owners had had their VAT repaid, even though their situation relative to the planning consents was identical to that of the Appellants. Specifically, Mr Bond gave evidence that he used a neighbour’s claim, which had been successful, as a template for his own claim. HMRC did not deny that others had been refunded, and based their case before us on not replicating an error.  
58.	 Of the various tests set out in the legislation relating to what is colloquially known as the DIY Refund scheme, two are in point in this case, namely whether the Appellants’ works on their flat were lawful as required by Section 35(1)(b) and whether their flat was a dwelling house under Note 2 to Group 5.  We have considered each of these below, and then the unfairness claim. 

Lawful under Section 35(1)
59.	 HMRC argued that Section 35 is permissive and exceptional in the framework of VAT, and under general law such exceptions are to be interpreted restrictively.  We acknowledge this principle, while noting that the decisions argued before us dealt with cases where the individual has knowingly flouted the requirements of the permission, or never had it at all, whereas in this case the Appellants had always worked within the requirements 
60.	 Nevertheless, we are bound by the words of the statute. Section 35(1) requires that “where a person carries out works…his carrying out the works is lawful’. The present tense used in this section makes it clear that the work must be lawful at the time it is carried out. 
61.	 The Council report stated at paragraph 46 that the development had not been lawfully implemented. The Appellants argued that Paragraph 155 was to be preferred to this, but we preferred HMRC’s interpretation that paragraph 155 was in the context of design issues and in that context there was no problem. We found that the paragraph was not meant to contradict the general conclusion at paragraph 46.
62.	 We found that the general case law was strong on planning permission standing or falling as a whole unless it is trifling as in Sage v Secretary of State for the Environment, Transport and the Regions and others [2003] UKHL :
“As Counsel for Mr Sage has accepted, if a building operation is not carried out both externally and internally, fully in accordance with the permission, the whole operation is unlawful”.

63.	 Similarly in Garland v Minister of Housing and Local Government and Another [1969] Court of Appeal it was said :
“If there was only a trifling excess, it would be different. There might then be only an excess over a limitation. But when there is a difference in substance, then the whole is done without any permission at all.”
64.	 In Cardiff County Council v National Assembly for Wales there had been no breach of planning permission, just a failure to finish the works. This was different to the Appellants’ case and therefore distinguished it and the dicta in this case supported HMRC’s position.
65.	 The case of Toni & Guy related to enforcement notices not planning permission and we accept HMRC’s contention that it had “no application at all to this case”.
66.	 Although Henry Boot was included in the authorities we were not taken to it during the hearing and we found in any event that it was not helpful to the Appellants’ case.
67.	The Appellants argued that Section 75 TCPA “enures for the benefit” means that different interests in the land within a development have right to be treated separately in the context of  planning permission. We interpret this provision as meaning that the individuals can take benefit of the planning permission, not that the permission itself is in some sense divisible between them. 
68.	We therefore find that the works carried out on the Appellants’ flat were unlawful at the time they were carried out and therefore could not be regularised by retrospective permission. The withdrawal of planning permission made the whole development unlawful, including this flat.  
69.	 In the absence of any valid permission for the works which were carried out at the Jam Factory, any works done to the Appellants’ flat were unlawful and so we find that they had no valid claim under Section 35. 

Dwelling house
70.	 However, should we be wrong on this, we have gone on to consider the “dwelling house test” at Note 2 (a) to (d) of Group 5.  
71.	 This is satisfied if:
	“statutory planning consent has been granted in respect of that dwelling and its construction or 	conversion has been carried out in accordance with that consent.”
Here statutory planning consent had been granted in respect of the Appellants’ flat, and the conversion was carried out in accordance with that consent. 
72.	 We thus found that the Appellants satisfied the dwelling house test. 
73.	 We also considered whether the existence of this separate and specific test relating to the validity and currency of planning consents operated to exclude that area from the wide meaning of “unlawful” in Section 35(1).  However, our analysis of the legislation is that satisfying the dwelling house test merely enables a person to come within s35(1D), and does not limit the meaning of “unlawful” in  Section 35(1). 
74.	 As a result, satisfying the dwelling house tests availed the Appellants not at all as they had not satisfied the “lawfulness” test of Section 35.

Unfairness 
75.	 However, we found that the Appellants had raised an arguable case on unfairness. On the facts, HMRC had treated them differently to other residents in exactly the same position as them, and the guidance of Elias J in British Sky Broadcasting Group PLC v Commissioners of Customs and Excise is highly relevant in this context. 
76.	 The facts also show that the Appellants knew nothing of the withdrawal of the planning consent, and have thus been penalised for a situation about which they knew nothing.  They were never told that the development, which they had been told was ‘lawful’ had become ‘unlawful’ and then again was retrospectively regularised. In this context we note that the Appellants were within the purpose of the legislation. The reason there is a requirement that the developments be “lawful” under Section 35 is to avoid giving refunds to people who construct illegal developments. The works on this flat were begun lawfully with planning permission and at all material times the Appellants believed this was current; they did nothing outside that permission and retrospective permission was not required in order to regularise anything carried out in relation to their flat.
77.	 Currently these issues of unfairness are outside the jurisdiction of the Tribunal although they may be within that of the Upper Tribunal, see the comments of Mr Justice Sales in Oxfam v HMRC [2009] EWHC 3078 (Ch)
78.	 Having been advised at the hearing that the current proper course was to make an application to the High Court for a judicial review by the Upper Tribunal, the Appellants declined to do so, but informed the Tribunal that they may wish to raise these issues on appeal. 
79.	The Appellants may wish to consider consulting the Revenue Adjudicator on this matter.

Decision
80.	The Appeal is dismissed. At the time that the works were done on the Appellants’ flat they were unlawful in accordance with Section 35 VATA 1994.
81.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

                      
                            TRIBUNAL JUDGE S.M.G.RADFORD

RELEASE DATE: 27 May 2010