[2010 UKFTT 355 (TC)

TC00637

Appeal number TC/2009/10012 

DIY Builders Scheme - Section 35(1A)(a), Note (2)(b), Note 16 (a) and (b), meaning of word wholly - VAT Notice 719 4.1.2, loft conversion 

FIRST-TIER TRIBUNAL

TAX

ALI KIA JAHANSOUZ 
Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (VAT)	
Respondents

				TRIBUNAL: 	Paulene Gandhi 
						Susan Hewett

Sitting in public in London on 5 May 2010

Mr Jahansouz appeared in person

Mr Johnathan Davey, Counsel instructed by HMRC

© CROWN COPYRIGHT 2010
DECISION
1.     Mr Jahansouz appeals against the decision of HMRC to refuse his claim for a VAT refund of £10,107.01 in relation to the sums expended on the construction of a flat at 37a Bridge Road, Uxbridge. The basis for HMRC's position in such regard is that the works in question do not fall within the scope of Section 35(1A) of the Value Added Tax Act 1994 ("VAT Act 1994")

2.    The main issues for us to decide are whether: 
a.  The new flat built by Mr Jahansouz has its own separate entrance and cannot be accessed by going through any of the other flats in the property.  If the new flat does not have its own separate entrance then Mr Jahansouz is not entitled to a refund of his VAT - Section 35(1A)(a) and Note (2)(b) to Group 5 of Schedule 8 and:  

b.  The new flat is a conversion, reconstruction, or alteration of the existing building in which case he is not entitled to a refund of his VAT - Section 35(1A)(a) and Note (16)(a) to Group 5 of Schedule 8 or

c.  The new flat is an enlargement or extension of the existing building in which case he is not entitled to a refund of his VAT - Section 35(1A)(a) and Note (16)(b) to Group 5 of Schedule 8 unless

d.  The new flat creates an additional dwelling or dwellings in which case he is entitled to a refund of his VAT  - Note (16)(b).

e. Alternatively the works constitute a "residential conversion" (Section 35(1A)(c)) because they consist in the conversion of "a non-residential building, or a non-residential part of the building "into a building or part thereof designed as a dwelling in which case he is entitled to a refund of his VAT (Section 35(1D); and Note (7A) of Group 5 to Schedule 8) .

Legislation
3.     Section 35 VATA 1994 states:
“(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;
(c) anything which would fall within paragraph (a) or (b) above if different parts of the building were treated as separate buildings.

(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;
(c) anything which would fall within paragraph (a) or (b) above if different parts of a building were treated as separate buildings.

(4) The notes to Group 5 of Schedule 8 shall apply for construing this section as they apply for construing that Group [but this is subject to subsection (4A) below] . 

(4A) The meaning of “non-residential” given by Note (7A) of Group 5 of Schedule 8 (and not that given by Note (7) of that Group) applies for the purposes of this section but as if—
(a) references in that Note to item 3 of that Group were references to this section, and
(b) paragraph (b)(iii) of that Note were omitted

4.     The Notes to Group 5 of Schedule 8 VAT Act 1994 provides:
(2) A building is designed as a dwelling or a number of dwellings where in relation to each dwelling the following conditions are satisfied—
(a) the dwelling consists of self-contained living accommodation;
(b) there is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling;
(c) the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision; and
(d) 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

(7A) For the purposes of item 3, and for the purposes of these Notes so far as having effect for the purposes of item 3, a building or part of a building is “non-residential” if—

(a) it is neither designed, nor adapted, for use—

(i) as a dwelling or number of dwellings, or
(ii) for a relevant residential purpose; or
(b) it is designed, or adapted, for such use but—

(i) it was constructed more than 10 years before the commencement of the works of conversion, and
(ii) no part of it has, in the period of 10 years immediately preceding the commencement of those works, been used as a dwelling or for a relevant residential purpose, and
(iii) no part of it is being so used.

(8) References to a non-residential building or a non-residential part of a building do not include a reference to a garage occupied together with a dwelling.

(16) For the purpose 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; or

Factual background
5.    Mr Jahansouz of 37a Bridge Road, Uxbridge, was not registered for VAT for the relevant period, but made a claim under Section 35 of the VAT Act 1994 ('The "do it yourself" Builder’s Scheme').

6.    The property at 37 Bridge Road is a Victorian detached house which was originally built in 1879. There was some confusion as to whether before the conversion works it was one house or contained a ground floor flat and a first floor flat. However it is now clear that it was converted into ground and first floor flats. The date of conversion is unknown but it is estimated to be late 1932 early 1940 (nothing turns on the date of conversion).

7.   Since 24 October 1988 a leasehold title in respect of the ground floor flat at the property (title number NGL345004) has been registered in the name of Britt Louise Le - Sueur.  Since 23 November 1999 a leasehold title in respect of a first-floor flat (37A Bridge Road) at the property (title number NGL345383) has been registered in the name of Mr Jahansouz.  Since 13 June 2001 a freehold title in respect of the whole of the property (title number NG169197) has been registered in the name of Mr Jahansouz.

8.    On 23 October 2006 Mr Jahansouz applied for planning permission in respect of works to be carried out (according to the grant of planning permission dated 18 December 2006) at 37A Bridge Road.

9.     The grant of planning permission dated 18 December 2006 records the permission as been granted for:
"Description of development
Construction of a new gable end roof to replace the existing roof, including the erection of two dormer windows and two front roof lights to create an additional self-contained flat in the roof space."

10.   On 11 September 2008 the London Borough of Hillingdon ("the council") issued a certificate of completion in respect of the works. The certificate describes the work as a "loft conversion" at 37A Bridge Road. However the regularisation certificate issued by the council describes the works as the “conversion of existing house into 2 no. self-contained flats dated 1 September 2008.
11.  In late 2008 Mr Jahansouz filed VAT form 431 headed "VAT refunds for DIY builders and converters" and dated 11 November 2008. Mr Jahansouz thereby claimed a VAT refund of £10,107.01 in respect of the works undertaken.

12.   By letter dated 17 November 2008 HMRC requested that Mr Jahansouz complete part 2B of VAT form VAT 431 and provide evidence that the building had been empty for at least 10 years prior to the works being effected.

13.  By letter dated 2 December 2008 Mr Jahansouz confirmed that his claim was "for new build addition to the building" and was made under sections 4.1 and 4.12 of VAT notice 719.

14.   By letter dated 9 December 2008 HMRC informed Mr Jahansouz that his claim had been declined on the grounds that a conversion of the roof space had occurred so the conversion did not fall within the DIY Builder’s Scheme because it was not a "residential conversion" within the meaning of Section 35(1A)(c) of the VAT Act. HMRC informed Mr Jahansouz that to be eligible for a refund, the part of the building that had been converted must never have been used as a dwelling, or must not have been used as a dwelling in the 10 years immediately before the start of work on the site.

15.  By letter dated 22 January 2009 HMRC informed Mr Jahansouz that the original decision had been upheld on review.

16.   On 29 March 2009 Mr Jahansouz filed his Notice of Appeal.

Discussion 
17.    HMRC sought to rely on arguments which had been conceded in their review letter of 22 January 2009. In that letter HMRC state that it is not disputed that the extension Mr Jahansouz built meets the ‘designed as a dwelling’ criteria but it is not eligible for the scheme as the new dwelling is not wholly within an extension but incorporates the original loft space of the existing residential holding. Mr Jahansouz was rather unhappy about HMRC going back on this ‘concession’.  
18.   We however accept Mr Davey’s arguments that in reality once a Notice of Appeal has been filed the parties enter into correspondence including seeking more information from each other and the nature of the case may either change or not be fully apparent until further information has been provided.  In particular we accept that any new arguments relied upon by HMRC were submitted in HMRC’s statement of case which was dated some seven months ago on 23 September 2009. Therefore these arguments were not submitted at the last minute and should not have taken Mr Jahansouz by surprise, despite him being unrepresented.  We also find that Mr Jahansouz has not relied on HMRC's review decision letter as he has addressed fully HMRC’s arguments (as contained in their statement of case) in his own statement of case and at the hearing today.  
19.   Mr Jahansouz’s credibility was not seriously challenged by Mr Davey. In any case having seen and heard Mr Jahansouz for ourselves we have no hesitation in finding him credible. 
20.    The only credibility issue raised by Mr Davey was that Mr Jahansouz’s statement of case suggests that there was a ground floor flat and a first floor flat but his letter of 16 August 2009 to HMRC indicates otherwise.   Having looked at HMRC’s letter of 19 June 2009 (which was responded to by Mr Jahansouz on 16 August 2009) we accept Mr Jahansouz’s contention that when he replied to HMRC by letter of 16 August 2009 he was referring to the property he lived in i.e. Flat 37A.  Looking at HMRC’s letter of 19 June 2009 it specifically asks Mr Jahansouz to provide “Further and Better Particulars in respect of the building at 37a Bridge Road…”  

Direct internal access
21.   The only aspect of Note (2) to Group 5 of Schedule 8 VAT Act 1994 in dispute is whether there was any provision for direct internal access from the dwelling to any other dwelling or part of a dwelling i.e. Note (2) (b).
22.   HMRC argue that the newly constructed flat does not constitute a building "designed as a dwelling" within the meaning of Section 35(1A)(a) because, contrary to Note (2)(b) to Group 5 of Schedule 8, the layout of the building at 37 Bridge Road is such that there is provision for direct internal access from the newly created flat to another dwelling within the building.

23.   The expression "direct internal access" is not defined under the VAT Act 1994, but HMRC submit that as a matter of ordinary language it must include the situation in which two dwellings share an adjoining door. If, for instance, access to the new flat can only be obtained by passing through another flat, or if notwithstanding that the new flat has its own entrance accessible without passing through another flat, the new flat nonetheless shares an adjoining door with another flat, then Note (2)(b) of Group 5 to Schedule 8 will not be complied with and, accordingly, the new flat will not be a "dwelling" within the meaning of Section 35(1A)(a). 
24.  Mr Davey submits that as Mr Jahansouz has a lodger in the new flat this by definition means the lodger shares the dwelling with Mr Jahansouz. We do not accept that having a lodger in Flat 37B should be determinative of whether Flat 37B has its own separate access.  
 25.   Instead we look at the property’s designed use. It is clear from Mr Jahansouz’s oral evidence as well as the plans and photographs we have that (post conversion) there is the following:
•	Flat 37 on the ground floor. This has its own entrance at the side of the property through an alleyway.  The owner of Flat 37 has no access to the front door from street level which leads to 37A and 37B.  
•	Flat 37B has its own entrance and cannot be accessed via Flat 37 (the ground floor flat) or Flat 37A(the first floor flat).  
•	Someone wishing to enter Flat 37B (the new second floor flat) will enter through a communal door at street level and then ascend the stairs to a communal lobby area from where they will go through a set of doors up the stairs to Flat 37B. 
•	The entrance to Flat 37A is through a separate set of doors in this communal lobby area on the first floor.  
•	Flats 37A and 37B are capable of being occupied independently and by two unrelated families who could live in the flats independently and separate from each other.
26.    Mr. Davey accepted that where there is a communal front door but then the actual flat has its own separate entrance this would be sufficient to bring the dwelling within Note (2)(b ).  

27.     For these reasons we find that Flat 37B has its own entrance.

Construction of a building
28.   We then have to consider Note 16 (a) and (b) to Group 5 of Schedule 8 VAT Act 1994 and whether Flat 37B is a conversion, reconstruction or alteration of an existing building or an enlargement or extension to an existing building.  We note that Mr Jahansouz did not seek to argue that Flat 37B was an annex (as per Note (17)).
29.   Having regard to Note (16) to Group 5 of Schedule 8 HMRC submit that the proper analysis in the present case is that the works constitute a "conversion" or "reconstruction" or "alteration" (under Note (16)(a)). This is the manner in which the council describes the works in its completion statement which under the heading "details of work" states "description: loft conversion". This analysis is also consistent with the fact that the works in question are limited in nature in that they do not result in the footprint of the building being enlarged. If the works fall within the scope of Note (16)(a), then the works do not fall within the scope of Section 35(1A)(a).

30.   We accept that the works were described by the council in its completion certificate as a “loft conversion" but we accept Mr Jahansouz’s evidence that this was a mistake.  This can be deduced from the regularisation certificate dated the same day as the completion certificate and describing the works as a 'conversion of existing house into two self-contained flats'.  Further the regularisation certificate accords with both what Mr Jahansouz’s chartered surveyor has stated in his letter of 4 May 2010 and the planning approval.  Approval was given by the local authority for the following:

•	Construction of a new gable end roof to replace the existing roof, including the erection of two rear dormer windows and two front roof lights to create an additional self-contained flat in the roof space - dated 18 December 2006.

•	Conversion of the house into two self-contained flats - dated 1 September 2008.

31.    To determine whether ‘the footprint of the building’ has being enlarged we consider the test set out in Cantrell v Commissioners of Customs and Excise [2003] EWCH 404 (Ch) where it was stated that in applying the words used in Note (16) it is necessary to adopt a two-stage approach: first identify the existing buildings as they were before the construction work began and then second to determine whether the new construction satisfies all or any of the terms in Note 16. Further:
“It is necessary to examine the pre-existing building… and the building… in the course of construction when the supply is made. What is in the course of construction at the date of supply is in any ordinary case (save for example a dramatic change is later made in the plans) what is subsequently constructed. Secondly the answer must be given after an objective examination of the physical characters of the building… at the two points in time, having regard (inter alia) to similarities and differences in the appearance, the layout, the uses for which they are physically capable of being put and functions which they are physically capable of performing. The terms of the planning permissions, the motives behind undertaking the works and the intended or subsequent actual use are irrelevant, save possibly to illuminate the potential for use inherent in the building."
32.   Macnamara (VTD 16039) describes conversions, reconstructions and alterations to existing buildings as the work most closely integrated with an existing building and     enlargements and extensions as structural work which increases the overall size or capacity of an existing building; the degree of integration of extensions being 'one stage less than with enlargements'.
33.   The building before conversion consisted of:
•	A two storey building

•	A flat roof which had access via a roof ladder

•	A front gable low pitch roof which had no direct access from the first-floor flat. Access was from the flat roof through a hatch next to the chimney. 

•	There was Flat 37 on the ground floor and Flat 37A on the first floor 

34.   After conversion what has changed:
•	It is now a three storey building
•	Two new flats have been built where the pitched and flat roof were previously

•	Each flat has its own separate utilities, bathroom, kitchen, and front door

•	There is a new enlarged roof over the whole of the property which has increased the height of the roof by 500mm which has resulted in an increase in the volume.  

•	The new design required the whole of the roof to be removed and structurally rebuilt.

•	No part of the original roof was used in the new flat because the age of the original building, the low pitch, size of rafters, area, and floor joists meant the original roof was not compatible with modern structure methods and building regulations.

•	The building works included the erection of two rear dormer windows and two front roof lights.

35.  In our view an educated observer would describe the building works as an enlargement, i.e. a two storey building is now a three storey building particularly as the building has increased 500 mm in height and thus increased in volume. We do not therefore accept Mr Davey’s submission that the works do not result in the footprint of the building being enlarged. The building has now increased in height, volume, and shape. 

Additional dwelling v loft conversion
36.  We must then consider whether the enlargement creates an ‘additional dwelling or dwellings’ as per Note (16)(b) to Group 5 of Schedule 8 of VAT Act 1994.

37.  HMRC submit that while the works carried out amount to an enlargement or extension of an existing building, that enlargement or extension does not create "an additional dwelling" but only part of a dwelling, with the remainder of the newly created dwelling occupying the already existing roof space i.e. what, prior to the works, constituted the loft space.  The dwelling created is partly within the pre-existing loft space and partly on the flat roof. The new dwelling is not wholly within the enlargement or extension. Accordingly, the works do not fall within the scope of Section 35(1A)(a). 

38.   HMRC state that the correctness of their construction of Note 16(b) (i.e. that Note (16)(b) requires that the works create an entirely new dwelling rather than just part of a dwelling) is evidenced by the wording of VAT Notice 719, which provides guidance on the workings of Section 35 and the Notes to Group 5 of Schedule 8, and indicates that Note (16)(b) requires the new dwelling created by an enlargement or extension to be "wholly within the enlargement or extension" (paragraph 4.1.2 of VAT Notice 719).

39.   The correctness of their construction can also be seen by considering the difficulty with the alternative construction. If contrary to HMRC's contention, Note (16)(b) only requires that the enlargement or extension in question creates part of an additional dwelling, then this would allow the situation in which works creating a new flat and constituting a "conversion" would not be eligible for a VAT refund (Note (16)(a) read with Section 35 (1A)(a)) but works identical in all respects save that they increase the size of the property in question by a small amount (by, say, adding a small additional room to the new flat) would be eligible for a VAT refund because they would fall within the scope of Note (16)(b). HMRC submit that it is unlikely that this result would have been the intention behind the legislation, and, in any event, such a construction is not borne out by the words of Note (16)(b). Had it been intended that Note (16)(b) be read as saying "any enlargement of, or extension to, an existing building except to the extent the enlargement or extension creates an additional dwelling or part of an additional dwelling", there would have been nothing to prevent the person who drafted the legislation from including the underlined words within the provision. They did not do so.  

40.   HMRC submits that what Mr Jahansouz has done is a loft conversion.  These words must be given their everyday meaning.  The house is a residence owned by Mr Jahansouz who also lives in the house and he is altering the loft space.  Although it is accepted the roof has changed its location this is clearly a loft conversion as the building works create a more usable space then was there previously. Further the council have described it as a loft conversion. The house is the same as it was but changes have occurred beneath the roof which means the loft area is more usable or usable in a different way.  The fact that the roof is moved six inches up or out does not mean this is not a loft conversion
41.   Section 4.1 and 4.1.2 of HMRC reference Notice 719 (May 2002) states:
"An existing building is enlarged or extended and the enlargement or extension creates an additional dwelling.
So, for example, a new qualifying flat built on top of an existing building would be within the Refund Scheme. But the conversion of a loft space into a flat would not."

42.   Both parties seek to rely on VAT Notice 719 4.1.2 but this is of course guidance only and is not part of the law.  Nevertheless it provides ‘DIY Builders’ with guidance as to what HMRC thinks will not amount to an additional dwelling and gives the example of the conversion of a loft space into a flat but does state that a new qualifying flat built on top of an existing building would be within the Refund Scheme.
43.   Mr Jahansouz seeks to rely on planning permission to state that the flats are self contained additional dwellings however this on its own is not relevant save “possibly to illuminate the potential for use inherent in the building” (Cantrell).
44.     Do the above facts as we found mean that what has been built is a loft conversion.  
45.   Giving the words ‘loft conversion’ their ‘every day ordinary’ meaning it is clear to us that a loft conversion is the process of transforming an empty attic space into a functional room.  It seems to us that typically a loft conversion would be within the confines of the original roof.  However Mr Jahansouz has completely demolished the original roof structure and created an entirely new dwelling which does not incorporate any of the original roof structure.  

46.   We accept that by doing this Mr Jahansouz has nevertheless used some of the space where the old pitched roof was located.  HMRC therefore submit that the works Mr Jahansouz has carried out do not create an entirely new dwelling but just part of a dwelling and rely on paragraph 4.1.2 of VAT Notice 719 which requires that the new dwelling created by an enlargement or extension to be "wholly within the enlargement or extension".

47.   If HMRC are correct in their interpretation in our view only people with flat roofs could ever reclaim the VAT for building a new flat on top of an existing building.  Anyone with a pitched roof would only ever be considered to be building a loft conversion on top of an existing building regardless of what happened to the original pitched roof or indeed what was built on top of the existing building.  This is not what the ordinary person would view as being a sensible interpretation.  In particular we observe that Note 16(b) itself does not contain the words ‘wholly’.   

48.    In any case looking at the ordinary meaning of wholly it means ‘completely, totally, or entirely’.  In our view Flat 37B is ‘wholly’ within the enlargement because it does not protrude outside the enlarged area or go beneath the enlarged area for instance to include part of Flat 37A.  

49.   There is no definition in statute nor guidance from the case law as to what would constitute an ‘additional’ dwelling.  We are therefore left with taking a common sense view of this issue.  In the original pitched roof space it is not in dispute that there was attic space (this is regardless of how big it was, who had access to it, and how such access was obtained).  The original building was enlarged by taking off this pitched roof, using both the area of the flat roof and pitched roof to build a self contained flat with a kitchen, bathroom, and everything else required to make the space on top of the original building habitable and then adding a new roof.  This in our view amounts to building an ‘additional’ dwelling.  

Residential conversion
50.   In the event that Mr Jahansouz seeks to argue that the works fall within the scope of Section 35(1A)(c), HMRC submit as follows. Section 35(1A)(c) refers to "residential conversion". Clarification as to the meaning of "residential conversion" is provided by Section 35(1D) and by Note (7A) to Group 5 of Schedule 8. By Section 35(1D) 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 building or part thereof designed as a dwelling. By Note (7A) to Group 5 of Schedule 8 a building or part of the building is "non-residential" if (i) it is neither designed, nor adapted, for use as a dwelling or a number of dwellings or (ii) it is designed or adapted for such use but was constructed more than 10 years before the commencement of the works of conversion, and no part of it has, in the period of 10 years immediately preceding the commencement of those works, been used as a dwelling, and no part of it is being so used.

51.   Thus the present case is one in which the owner of the house is someone who lives in the house and has effected works in respect of the roof space. HMRC submit that it cannot realistically be said that the roof space of such a building, owned and occupied in such circumstances, is "non-residential" (Section 35(1D); Note (7A) to Group 5 of Schedule 8); and it follows from this that the works do not constitute a "residential conversion" within the meaning of Section 35(1D). In MerleWood Estates Ltd v Commissioners for HM Revenue and Customs (decision of VAT and Duties Tribunal dated 22 September 2008), the tribunal had to consider the case of a number of blocks of flats and the question of whether the roof space of the buildings was "non-residential". The tribunal decided that it was. In so holding, the tribunal expressly distinguished the case of a block of flats (where the roof space could be considered "non-residential") from the case of a house (where it could not). The tribunal said (at paragraph 21 of the decision):
"This is not a case where the roof space of a building used as [sic] by single household and occupied with the rest of the house was converted."

52.  It is submitted that the present case falls squarely within the type of situation envisaged by the tribunal in making the above statement. For the avoidance of doubt, the position is not altered if as a matter of fact it turns out (contrary to Mr Jahansouz’s position as set out in his letter of 16 August 2009) that prior to the commencement of the works the house was divided into flats: the roof space either formed part of the unencumbered freehold (owned by Mr Jahansouz) or it fell within the demise of the first floor flat (owned by Mr Jahansouz). In the circumstances, the works in the present case do not constitute the conversion of a "non-residential part of a building" (Section 35 (1D)) and therefore do not constitute a "residential conversion" within the meaning of Section 35(1)(A).

53.  The roof space would have served as an "attic" in Mr Jahansouz’s first floor flat. There would have been no impediment to the residents of the first-floor flat at 37A Bridge Road accessing the roof space, storing goods there or placing water tanks, electrical cabling and other utility services in it. The roof space would have served as part of that dwelling. It strains the natural understanding of a dwelling to exclude from it areas such as the roof space. Therefore, the roof space would have been a residential part of the first-floor flat.

54.  Furthermore Note (8) to Group 5 of Schedule 8 states that references to a non-residential part of the building do not include a reference to a garage occupied together with a dwelling. HMRC submit that similarly a roof space cannot be separated from Mr Jahansouz’s flat at 37A Bridge Road. Such a separation would be artificial. The attic is just as much a residential part of a residential dwelling as the garage.

55.  The works in question do not fall within the scope of any of the subsections of Section 35(1A) and accordingly do not constitute works in respect of which the VAT refund claimed by Mr Jahansouz applies. 

56.  Mr Jahansouz says that the original building had two roofs which were a non-habitable and non-residential part of the building since there was no direct access to them:
(a) The front gable low pitch roof had no direct access from the first-floor flat. Access was from the flat roof through a hatch next to the chimney. 

(b)    The flat roof with access via a roof ladder.

57.  The new flat therefore comprises the conversion of a non-residential building or part of a building into a building designed as a dwelling as per Note (7A) to Group 5 of Schedule 8.   The flat roof space was not habitable as it was not owned by 37A but when it was converted into habitable space it qualified.

58.    Mr Jahansouz has never claimed that the property was not in use for 10 years.

59.  Given our views above we have not found it necessary to consider Section 35(1A)(c) and whether the building works carried out constituted a ‘residential conversion’ because our findings that Mr Jahansouz comes within Section 35(1A)(a) is determinative of the issues in this appeal. 
Conclusion
60.   This appeal is allowed and Mr Jahansouz is entitled to a VAT refund of £10,107.01.
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 

RELEASE DATE: 30 July 2010