20945

DO-IT-YOURSELF HOUSEBUILDER – supplies of goods with services – should have been zero-rated – advice that the Appellant may be able to reclaim pre-4 December 1996 VAT from the supplier who can claim it from HMRC if the claim is made by 31 March 2009 – pool – whether part of the building or site – no – appeal dismissed  

LONDON TRIBUNAL CENTRE

	DERMOT O’REILLY	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)
					LYNNETH  M SALISBURY

Sitting in public in London on 27 January 2009

The Appellant in person

Christiaan Zwart, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	Mr Dermot O’Reilly appeals against two refusals to refund a under the DIY Refund Scheme relating to the erection of a dwelling at Bylanda, Brighton Road, Hassocks, Sussex, the first dated 19 March 2008 of a total of £14,258, and the second dated 7 January 2009 (which by consent we joined with the existing appeal) of a total of £4,522.16 in relation to the swimming pool at the property.  The Appellant appeared in person; the Respondents (“HMRC”) were represented by Mr Christiaan Zwart.
2.	We heard evidence from the Appellant and find the following facts:
(1)	The Appellant purchased the site in 1985.  Planning permission to build a new dwelling was refused but outline permission was allowed on appeal in 1989 subject to conditions.  Work commenced with the construction of the pool in 1991.  In 1994 the conditions attaching to the original outline permission having failed he was granted a new full permission in 1984.  No point is taken by HMRC in relation to the period before the full planning permission was granted.
(2)	The building consists of the pool at the lowest level surrounded on three sides by four bedrooms, a lounge a plant room and a further room.  On a higher level built above those rooms on one side of the pool is a dining room and kitchen with a terrace outside.  There is also a turret on a higher level.  The pool (including the terrace) is covered by a structure that the Appellant obtained from Australia consisting of a frame covered with PVC that folds down in the manner of a pram cover. 
(3)	The construction lasted a long time and was first occupied in May 2005, with the habitation certificate granted following inspection by the local authority in August 2005.  On 15 June 2006 the Appellant made a claim for a VAT refund of £36,169.04 of which £12,780.28 was refunded.  
3.	The following provisions of the VAT Act 1994 are relevant:
35 Refund of VAT to persons constructing certain buildings
(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;…
 (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.
…
(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.
Schedule 8, Group 5
2.  The supply in the course of the construction of—
(a)     a building designed as a dwelling or number of dwellings or intended for use solely for a relevant residential purpose or a relevant charitable purpose; or
(b)     any civil engineering work necessary for the development of a permanent park for residential caravans,
of any services related to the construction other than the services of an architect, surveyor or any person acting as a consultant or in a supervisory capacity.
…
4.  The supply of building materials to a person to whom the supplier is supplying services within item 2 or 3 of this Group which include the incorporation of the materials into the building (or its site) in question.
Notes
(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.
…
(22) “Building materials”, in relation to any description of building, means goods of a description ordinarily incorporated by builders in a building of that description, (or its site), but does not include—
(a)     finished or prefabricated furniture, other than furniture designed to be fitted in kitchens;
(b)     materials for the construction of fitted furniture, other than kitchen furniture;
(c)     electrical or gas appliances…
(23) For the purposes of Note (22) above the incorporation of goods in a building includes their installation as fittings.
4.	The Appellant contends that all the items are eligible for refund under s 35.  In relation to the pool this is part of the building.
5.	Mr Zwart contends:
(1)	In relation to supplies other than the pool the supplier should not have charged VAT as the work was a supply of services with goods that was zero-rated; since no VAT should have been charged there can be no refund. 
(2)	in relation to the pool the work was correctly charged at the standard rate as falling outside the definition of building materials in Note (22) as (a) not being ordinarily incorporated by builders in a building of that description as they are not incorporated into the building at all, and (b) not being materials incorporated into the building or its site within item 4 of Group 5 of Schedule 8 to the VAT Act 1994.  Although chargeable at the standard rate the VAT is not available for refund under s 35 since the goods are not used by the Appellant for the purposes of the works comprising the construction of a building designed as a dwelling within s 35(1A) since it is an outdoor pool (the notes to Group 5 being expressly incorporated by s 35(4)).  In the alternative HMRC contend that if the pool is part of the building designed as a dwelling the supply should have been zero-rated for the same reason as the first ground.
6.	In relation to supplies other than the pool the invoices in question consist of :
(1)	Guttering Services Limited: two invoices dated 28 August 2003 and 30 September 2003 for the installation of copper roofing, total VAT £602.43.
(2)	Isotech: two invoices dated 15 May 1996 and 6 May 1999 for sprayed foam insulation and coatings, total VAT £3,727.50.
(3)	Sussex Property Doctor: five invoices, two dated 26 March 1995, 1 February 1997, 23 February 1999 and one of which the copy we had bore no date, total VAT £847.18.
(4)	Sussex Premier Joinery: four invoices dated 13 March 2003, 5 August 2003, 7 October 2003, 1 November 2003, total VAT £1,450.91.
All the above show that labour is included and all relate to the supply of srvices and building materials (as defined in Note (22) supplied in the course of the construction of the dwelling.  Therefore on the basis of the evidence before us, they should have been zero-rated under items 2 and 3 of Group 5 of Schedule 8.
7.	Accordingly, they fall outside the refund in s 35 because VAT was not properly chargeable at the standard rate and also in so far as they relate to services since s 35 relates only to the refund of VAT on goods.  We therefore dismiss the Appellant’s claim in respect of them.
8.	Although it is not a matter for us, we record for the Appellant’s benefit that Mr Zwart helpfully suggested that the Appellant’s course of action should instead be to claim a refund of the VAT from the supplier, which in turn should claim the VAT back from HMRC.  However, because of the three year cap any invoice dated after 4 December 1996 is now out of time, but the supplier can still make a claim to HMRC in respect of invoices before that date so long as it makes a claim by 31 March 2009 because this is the transitional period allowed by Parliament in s 121 of the Finance Act 2008.  The Appellant mentioned that one of the suppliers had since de-registered but we do not think that prevents them from making such a claim.  We should add that our decision does not bind HMRC to make such a refund to the supplier because our decision is on the basis of the evidence before us, at which the supplier was not a party and it is possible that the supplier has evidence that would lead to a different conclusion.
9.	In relation to the pool, we agree with Mr Zwart’s primary contention that the supplies relating to the pool were correctly charged at the standard rate but since it is outside the building or its site, in so far as the supply is of goods, they are not supplied for the purposes of the construction of a building designed as a dwelling; and in so far as the supply is of services it is not eligible for refund under s 35.  We should add that even if we had agreed with the Appellant that the pool was in some way part of the building that would mean that the supply of services and goods should have been zero-rated and the same result would apply as in relation to the first claim but unfortunately as the supplier company has been liquidated there is no possibility of the Appellant obtaining a refund.  Accordingly, the Appellant’s claim fails in respect of supplies relating to the pool.
10.	The construction of a shed was also mentioned.  This does not qualify for a refund fails either on the ground that, if it falls within the building, it should have been zero-rated, and if it does not it does not qualify for the same reason as the pool.  We are not sure if they are still in issue but the Appellant’s skeleton mentions three further invoices, one relating to the supply and fitting of shelves and a bench, and two for the removal of excavated soil.  These do not qualify for refund, the first not being building materials within Note (22) and the second being a supply of services and not goods.
11.	We therefore dismiss the appeal.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE: 30 January 2009

LON/08/0878