19802
Zero-rating – whether Annexe built onto an existing dwelling house and leads to it by a swimming pool was a separate dwelling – planning permission prohibiting use as an independent dwelling house and the creation of a separate cartilage -  whether entitled to zero-rating – appeal refused – VATA 1994 Section 30 Schedule A Group 5 Note 2 (c)

EDINBURGH TRIBUNAL CENTRE

	RAYMOND DONAGHY	Appellant

	- and -

	THE COMMISSIONERS FOR 
	HER MAJESTY’S REVENUE & CUSTOMS	       Respondents

			Tribunal:	 T GORDON COUTTS, QC (Chairman):  

Sitting in Aberdeen on 28 September 2006. 

for the Appellant		Mr Gordon Strachan

for the Respondents	Mr Andrew Scott, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2006.

DECISION

INTRODUCTORY
Mr Strachan, the Appellant’s son-in-law has suffered a series of misfortunes.   He had an accident in which his neck was broken.  He is confined to a wheelchair and requires extensive attention from his wife.   They had occupied a house in Peterhead which, although a suitable basis for some alterations, did not provide a satisfactory home for the family if altered taking advantage  of the available allowances for disabled persons.   In consequence the Appellant agreed to the construction of a building, described in the planning permission as an “Annexe attached” to Mr Donaghy’s house.   The plans produced showed that there is one roof covering both properties and that ramps and suitable doorways have been created to allow Mr Strachan’s wheelchair to be manoeuvred and to give access to kitchen and bathroom.   Those plans disclose an attractive property which presently consists of a sector occupied by the Appellant and a sector occupied by Mr & Mrs Strachan and their children.   Between the two occupied portions there is a roofed swimming pool to which entrance can be obtained from either property.   However no point was taken about that matter.   The refusal of zero-rating on the build was based solely on the basis of the planning prohibition.  That was in these terms
	“That the proposed annex shall be used only for purposes incidental to the enjoyment of the existing dwellinghouse as such.  No separate cartilage shall be formed and the annex shall at no time be used as an independent dwellinghouse without an express grant of planning permission from the Planning Authority.”

STATUTORY FRAMEWORK
	The statutory framework is found in the terms of VATA 1994 Section 30 Schedule 8 Group 5.   Group 5 provides that there can be zero rated the first grant by a person constructing a building which was designed as a dwelling or a number of dwellings.  However note (2)(c) accompanying that Group reads:
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.

DECISION
	The terms of the planning consent and the express words of the Statute AT 2 (C) leave the Tribunal no scope for allowing zero-rating in the present circumstances and the appeal requires to be refused.

	The Tribunal would not wish to part from the matter however without expressing its sympathy and concern for the plight of Mr Strachan.   An alternative method of recovery of the VAT on the build would have been to have obtained zero-rating at the point of supply.  Although that is still open Mr Strachan cannot obtain advantage from his builder re-arranging his imposition of VAT because the builder has since become bankrupt, deregistered and no longer trades.   The only course for the Strachans is to obtain zero-rating on such component parts of the supplies to them as the suppliers can arrange to credit them.   Although that course may be troublesome to the suppliers it is to be hoped that they will do what they can to assist in the matter.   An assurance was given by the Respondents that such a course was still open and would be permitted subject to appropriate adjustment to the relevant returns of the traders to which no objection would be taken.

	The unfortunate circumstances for the Strachan family do not even end there however.  Because of the different provisions relating to local authority taxation the part of the premises occupied by the Strachans is separately assessed for Council Tax by the local authority.   It is to be hoped that the authority have taken account of the fact that this annexe cannot be separately sold and therefore that its valuation is not that of a standard dwelling but there can be little doubt from the plans at least that it would be possible to obtain rental income from the property as it presently stands and it therefore has some value which requires to be assessed for Council Tax purposes.  Again these circumstances followed upon a change of mind by the local authority they having previously exempted the Strachans’ dwelling.    That however is not a matter with which this Tribunal can deal.  All it can do is express sympathy, commend the efforts that the whole family have made to make Mr Strachan’s life tolerable, and refuse the appeal.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  2 OCTOBER 2006.

EDN/06/06