Ashfield District Council v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 30 November 2001 |
| Neutral Citation | [2001] EWHC 462 (Ch) |
| Date | 30 November 2001 |
| Court | Chancery Division |
Chancery Division.
Sir Andrew Morritt V-C.
Andrew Hitchmough (instructed by Berger Oliver) for the council.
Nigel Poole (instructed by the Solicitor for Customs & Excise) for Customs.
The following cases were referred to in the judgment:
C & E Commrs v Redrow Group plc VAT[1999] BVC 96
Dennis Rye Pension Fund Trustees v Sheffield City CouncilWLR[1998] 1 WLR 840
Value added tax - Refund - Local authority - Home improvement grants made to house owners - Grant works supervised by agency established by local authority - Payments to builders by council included VAT - Whether local authority entitled to refund of VAT - Whether builders supplied services to home owners or local authority - Value Added Tax Act 1994, s. 33- Housing Grants Construction and Regeneration Act 1996.
This was an appeal by Ashfield District Council ("the council") from the decision of a tribunal (No. 17,097; [2001] BVC 4107) which agreed with Customs' view that the authority was not entitled to a VAT refund in respect of payments to builders for grant-aided building works.
The council was a local housing authority. As such it was charged by the Housing Grants Construction and Regeneration Act 1996 with the administration within its area of the scheme for grant-aiding the renewal of private sector housing for which that legislation made provision. Under the Local Government and Housing Act 1989 a local housing authority was entitled to provide professional, technical and administrative services for owners and occupiers of dwellings in connection with works to their dwellings. Pursuant to that power the council set up within its environment health department an agency known as CNHIA which was available to supervise the work carried out and arrange for the grant moneys to be released by the council.
In some cases the council paid the builders directly for grant-aided work as permitted by s. 39 of the 1996 Act. Included in those payments was VAT in the aggregate sum of £83,547. The council claimed that Customs was liable to refund that amount pursuant to Value Added Tax Act 1994 section 33s. 33 of the Value Added Tax Act 1994. Customs disagreed and the council appealed to the VAT tribunal. The tribunal ([2001] BVC 4107) held that CNHIA did not act as principal but as agent for the house-owners and that the grant moneys were never the moneys of the council but were provided by statute for a particular purpose and which the council was merely responsible for distributing. Therefore the services provided by the builders were not paid for by the council. The council appealed to the High Court.
Held, dismissing the council's appeal:
1. The council's claim to deduct tax depended on identifying the payment of which the tax to be deducted formed part; if the goods or services were to be paid for by someone else it had no claim to deduction. Once the council had identified the payment, the question was whether it obtained anything in return for that payment. (C & E Commrs v Redrow Group plc [1999] BVC 96 applied.)
2. Section 39 of the 1996 Act conferred power to make direct payments to the builder. That did not entitle the council to pay the amount of the grant for any purpose other than that for which the grant was approved. Still less did it entitle the council to refuse to make any payment at all. The applicant owner was entitled as against the council to compel payment of an approved grant either to the owner or direct to the builder in discharge of the obligation for which the grant was given. (Dennis Rye Pension Fund Trustees v Sheffield City Council [1998] 1 WLR 840 considered.)
3. It was clear also that the person making the relevant payment had to be the person who was liable in respect of the underlying obligation. In this case, on the facts found by the tribunal, CNHIA had acted throughout as agent for the owner and neither CNHIA nor the council were liable to the builders.
4. It was true that in the cases to which this appeal applied the builders' invoices were rendered to and paid direct by the council. But it was not uncommon for a single movement of money to achieve the satisfaction of two or more liabilities. That had happened in the present case. The council was not liable to the builder, only to the applicant owner, and the applicant owner was liable to the builder on the contract made between them through the agency of CNHIA. In addition the applicant owner was entitled to receive the grant from the council unless the council paid the builder direct. There could be no direct payment unless the applicant owner had agreed to or at least acquiesced in the council having the power to do so. The direct payment by the council to the builder with the consent of the applicant discharged both liabilities. That analysis led to the conclusion that the relevant payment was made by the applicant through the council as its agent. It followed that the tribunal was right and the appeal failed.
5. Furthermore the council did not obtain anything in return for the payment. None of the matters relied on by the council constituted a supply of services by the builder to the local housing authority. The payment of the grant did not give rise to any right of the council exercisable against the builder. The obligations of the builder are due to the applicant owner under the contract between them. Rights to repayment conferred by s. 42 of the 1996 Act are exercisable against the applicant not the builder. The obligation discharged by the payment was to make the payment. Therefore the one could not be acquired in return for the other; they were opposite sides of the same coin. Any enhancement of the quality of life was received and enjoyed by the local community not the local housing authority. Even if increased property values fed through into council tax, there was no sufficiently direct link between the payment to the builder and any increased council tax to give rise to a liability to VAT on the part of the council and the consequential right to a refund under Value Added Tax Act 1994 section 33s. 33 of the Value Added Tax Act 1994.
Sir Andrew Morritt V-C:
1. Ashfield District Council ("the council") is a local housing authority. As such it is charged by the Housing Grants Construction and Regeneration Act 1996 with the administration within its area of the scheme for grant-aiding the renewal of private sector housing for which that legislation makes provision. In some cases Ashfield paid the builders for grant-aided work done by them. Included in those payments was VAT in the aggregate sum of £83,547. Ashfield claimed that the Commissioners of Customs & Excise ("Customs") were liable to refund that amount pursuant to Value Added Tax Act 1994 section 33s. 33 of the Value Added Tax Act 1994. Customs disagreed and Ashfield appealed to the VAT and Duties Tribunal. The tribunal (Mr JD Demack) also disagreed ([2001] BVC 4107) and Ashfield now appeals to the court pursuant to s. 11 of the Tribunals and Enquiries Act 1993. The question is to whom did the builders supply their services: the person whose application for a grant had been approved by Ashfield or Ashfield as the person who paid the builders?
2. Before answering that question it is essential to consider the material provisions of the...
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