20380
Value Added Tax — do-it-yourself builder's scheme — relief refused — VATA1994 s 35, sch8 Group 5, Notes (16), (18 ) — building demolished except for corner façade — retention of wall not a condition nor a requirement of Planning Permission — appeal dismissed
MANCHESTER TRIBUNAL CENTRE
DAVID POLLOCK and DAVID HEATH Appellants
- and -
THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: David S Porter (Chairman)
Carole Roberts
Sitting in public in Manchester on 20 August 2007
Mr Nigel Gibbon appeared for the Appellant
Miss Lisa Linklater of counsel, instructed by Acting Solicitor for HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2007
DECISION
- In this appeal David Pollock and David Heath challenge the Respondents' decision, set out in a letter dated 18 August 2006 addressed to David Miller of Bernard Atkins Limited VAT and Customs Duty Consultants for the Appellants, that David Pollock does not qualify for a refund of the VAT of £28,220.35 resulting in a net payment of £1593.82 which David Pollock incurred in the construction of a dwelling, known as Norton House, East Portlemouth, Salcombe, Devon. The claim was made in accordance with section 35 of the Value Added Tax Act 1994 which sets out the statutory provisions relating to what is known as the do-it-yourself builder's scheme The Respondents say that Mr Pollock has not satisfied the requirements of the scheme, and his claim for the refund must be rejected.
- Mr Nigel Gibbon represented David Pollock and Miss Lisa Linklater represented the Respondents. We heard no evidence but had an explanation of the parties respective positions from Mr Gibbon and Miss Linklater. It emerged that there were no significant disagreement about the facts. We were provided with various documents including plans showing the nature of the work and copies of the appropriate planning consents.
- Mr Gibbon referred us to the tribunal case of:
? Richard Midgley and Stella Midgley number 15379
? Miss Linklater referred us to the following tribunal cases:
? Bruce Pugh number 17013
? Philip Evans number 17264
? Peter and Stephanie Everard number 19626
? Steven Gillin number 19985
- Miss Linklater raised a preliminary point as to whether the Tribunal had jurisdiction in respect of Mr Pollock's claim. She withdrew her objection on the basis that the point had not been raised until the hearing and in any event if David Heath is the Appellant the facts of the case and the VAT consequences would be the same.
- David Pollock is an unregistered private individual, who owned the property at Norton House in Devon, and who engaged David Heath a builder registered for VAT purposes, to carry out extensive construction work at the premises. Planning Permission had original been given in June of 2004 under reference 20/0544/04F for the demolition of most of the building although it had been decided by Mr Pollock, on the advice of his architect that part of the corner façade and extended wall should be retained. The plans submitted with that application did not identify the façade to be retained. The conditions to that consent made no reference to the façade other than that the development was to be carried out in accordance with the drawings submitted with the application. Mr Gibbon produced to the tribunal copies of the plans submitted with the application with the façade edged in red but confirmed that the façade had not been so marked on the application. Mr Heath demolished rather more of the façade than had been intended and the architect enquired of the South Hams Council whether the original planning application could be amended to allow for that further demolition. In a letter dated 24 August 2005 South Hams Council indicated that because of the extent of the demolition it would be necessary to make a new planning application. Mr Dimeck in that letter said
" …. it is now clear from your coloured, marked up plans that very little remains of the original building and that works of demolition have gone some way beyond those envisaged and approved under planning approval 20/0544/04/F. In my opinion what has resulted in effect, is the erection of a new building, rather than alteration and e extension of existing dwelling …"
- As a consequence a fresh planning application was granted on 8 December 2005. The application utilised the same plans, which again did not show any colouring for the façade. The conditions to that consent made no reference to the façade other than that the development was to be carried out in accordance with the revised drawings. Mr Pollock's architect suggested that in light of the fact that only the corner façade was left standing it might be possible to have any VAT liability zero rated. Correspondence passed between the parties from which it is clear that the South Hams Council considered that the retention of the corner façade was no more than implicit in the planning application, and that in their view its retention or otherwise did not concern them as they had treated the second application as equivalent to a new build.
The law
- Section 30 is designed to place do-it–yourself builders in the same position as commercial builders so that they are able to recover the VAT incurred in paying for the building work. There are some limitations on the extent to which VAT can be recovered, which affect both commercial and non-commercial builders, but they do not arise here. The section incorporates (and gives statutory effect to) the notes to Group 5 of schedule 8 of the Act. Those notes impose a number of conditions which are to be satisfied if Mr Pollock is to recover the VAT incurred.
- We do not need to set out section 30 as its application to this case is uncontroversial. Subsection (1A) restricts the relief to certain works. The restriction is to "the construction of a building designed as a dwelling". Note (16) to Group 5 of schedule 8 provides:
"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".
And by note (18)
"A Building only ceases to be an existing building when:
(a) Demolished completely to ground level: or
(b) The part remaining above ground level consists of no more than a single façade or where a corner site, a double façade, the retention of which is a condition or requirement of statutory planning consent or similar permission".
- Mr Gibbon submitted that as the corner façade was included in the plans for both planning permissions it was implicitly included for planning purposes. The correspondence clearly shows that the Council were aware of the retention of the corner façade and required the development to be carried out in accordance with the plans submitted with the application. As a result the retention of the corner façade was a requirement of the planning permission and sufficient for the purpose of note (18). Contract law recognises implied terms which represent provisions which are so obvious to the parties that the parties would automatically agree that they should be included. On that basis the corner façade was known to be a requirement of the development.
- Miss Linklater submitted that it is common ground (or at least not seriously argued) that unless Mr Pollock can establish that he is within note (18) (b) the decision as to zero-rating has been properly arrived at : the pre-existing building was not "demolished to ground level". The issue is whether " the retention" of any façade was " a condition or requirement of statutory planning consent or similar permission". The retention of the corner façade was a decision made by Mr Pollock prior to submitting the plans for planning permission. It is clear from the correspondence with the Council that there was no requirement by the Council for the corner façade to be retained. In fact they had treated the second planning permission as tantamount to the erection of a new building and the retention of part of the house had no specific influence on the planning decision made.
The decision
- We dismiss the appeal. The planning permission must require, rather than permit, the retention of the corner façade. Section 35 is designed to create a level playing field between the commercial builder on the one hand and the do -it-yourself builder on the other. A commercial builder usually starts with a vacant site. Note (18) anticipates that in identifying that a building only ceases to be an existing building when (a) Demolished completely to ground level. The house, the subject of this application, was not demolished to ground level since a corner façade was left standing. Note (18) also recognises that a do -it -yourself builder may not be able to create a cleared site because the planning authority require part of the building to be retained. There may be several reason for the retention of the facade, not least to preserve the character of the area. The retention of the corner façade has, however, to be something the do-it -yourself builder has no control over because it is a condition or requirement leading to the granting of the planning permission. A condition or requirement imposed by the planners. The various cases, which we have been referred to, come to the same conclusion. Richard Midgley and Stella Midgley is out of line with the other cases, although the planning permission did require "the incorporation of an existing wall" In the present case, although the corner façade is undoubtedly part of the plans and known to the South Hams Planning Authority, it is not a condition or requirement which they have imposed. We are not told why the corner façade was retained, but we suspect it might well have been because the architect thought there might be a better chance of obtaining planning permission if the Appellant elected to keep it. In the event the South Hams Planning Authority treated the second application as a new build and stated in correspondence that the existence of the corner façade was immaterial to the application. It is unfortunate that the Appellant did not drop the corner façade in its entirety if he had done so zero rating would have been available to him. We dismiss the appeal and we award no costs against the Appellant as none were asked for.
DAVID PORTER
CHAIRMAN
Release Date: 27 September 2007
MAN/06/0622
