A.C.T. Construction Ltd v Commissioners of Customs and Excise

JurisdictionUK Non-devolved
JudgeLord Diplock,Lord Elwyn-Jones,Lord Keith of Kinkel,Lord Scarman,Lord Roskill
Judgment Date03 December 1981
Judgment citation (vLex)[1981] UKHL J1203-1
Date03 December 1981
CourtHouse of Lords
A.C.T. Construction Limited
(Respondents)
and
Commissioners of Customs and Excise
(Appellants)

[1981] UKHL J1203-1

Lord Diplock

Lord Elwyn-Jones

Lord Keith of Kinkel

Lord Scarman

Lord Roskill

House of Lords

Lord Diplock

My Lords,

1

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Roskill. For the reasons he has given, I too would dismiss the appeal.

Lord Elwyn-Jones

My Lords,

2

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Roskill. For the reasons he has given I would dismiss the appeal.

Lord Keith of Kinkel

My Lords,

3

I agree with the speech of my noble and learned friend, Lord Roskill, which I have had the benefit of reading in draft. Accordingly I too would dismiss the appeal.

Lord Scarman

My Lords,

4

I have had the advantage of reading in draft the speech to be delivered by my noble and learned friend, Lord Roskill. For the reasons he gives I also would dismiss the appeal.

Lord Roskill

My Lords,

5

My Lords, this appeal by the Commissioners of Customs and Excise against an order of the Court of Appeal (Lord Denning M.R., Brandon L.J., as he then was, and Ackner L.J.) dated 9th October 1980, whereby that court affirmed an order of Drake J. dated 16th March 1979, raises directly one short point of construction of Group 8 in Schedule 4 to the Finance Act 1972 ("the 1972 Act") as amended by paragraph 3 of the Value Added Tax (Consolidation) Order 1976 ("the 1976 Order") S.I. 1976 No. 128. But, as will later emerge, the appeal also raises, albeit indirectly, a second point of construction of that group upon which two members of the Court of Appeal, Lord Denning M.R. and Ackner L.J., expressed their views, albeit obiter.

6

My Lords, I should explain that section 12(4), together with section 43(2), of the 1972 Act authorised the Treasury to amend Schedule 4 by Statutory Instrument by adding to, or deleting from that Schedule, any description or by varying any description for the time being specified in it, subject to the parliamentary safeguard specified in section 43(4); the 1976 Order was made pursuant to those powers on the 29th January 1976. It was duly laid before the House of Commons on the 10th February 1976, and came into operation on the 2nd March 1976.

7

My Lords, the provisions of Schedule 4 both before and after amendment by the 1976 Order, were concerned with zero-rating for the purposes of Value Added Tax. Group 8 of that Schedule makes certain provisions for zero rating in connection with "Construction of Buildings etc.". Group 8 specifies three items, each numbered, which qualify for zero-rating. Those three numbered items are followed by what are described as "Notes", four in number, each numbered. Section 46(2) of the 1972 Act enjoins, inter alia, that Schedule 4 "shall be interpreted in accordance with the notes contained therein", power also being given by that subsection to amend those notes along with the substantive provisions of that Schedule.

8

My Lords, since everything in this appeal turns upon the construction of item 2 of Schedule 4 and of Note (2) ( a) of the "Notes" I set out the relevant wording for ease of reference:

"2. The supply, in the course of the construction, alteration or demolition of any building or of any civil engineering work, of any services …

Notes:

(2) Item 2 does not include—

( a) any work of repair or maintenance; …"

9

My Lords, the facts which give rise to this dispute are set out in detail in the carefully reasoned decision of the Value Added Tax Tribunal sitting in London, presided over by Mr. Neil Elles. Suffice it to say that the respondents are a construction company, and were employed to carry out certain underpinning operations to a number of houses of which the original foundations, which were laid in the 1930s and were acceptable under the then current building regulations but no longer acceptable under those regulations in force when the work, which led to the present dispute, was done, had been found seriously wanting as a result of the drought which took place in 1976. The respondents had developed a new method of underpinning to avoid the subsidence which would otherwise have occurred. This new method consisted of the construction of an additional foundation to the affected building in danger of subsidence, that additional foundation being not only additional to but also entirely separate from whatever original foundations still existed. It follows that whatever remained of those original foundations, and however defective they were or had become, was left unaltered. Your Lordships were shown a rough sketch of the underpinning in question which illustrated this brief description.

10

My Lords, the appellants assessed certain underpinning work done by the respondents to Value Added Tax in the sum of £1,072.44. This assessment followed certain correspondence. It related to four underpinning jobs carried out by the respondents—see the appellants' letter of 9th January 1978, Appendix pp. 17 and 18. The respondents appealed against that assessment but the Value Added Tax Tribunal in London, to which I have already referred, dismissed this appeal on the 8th August 1978. The respondents then appealed to the High Court. Drake J. allowed the appeal. His judgment is reported in [1979] 1 W.L.R. 870. An appeal by the appellants to the Court of Appeal was, as already mentioned, dismissed but your Lordships' House later gave leave to...

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