Catchpole
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 April 2012 |
| Neutral Citation | [2012] UKFTT 309 (TC) |
| Date | 13 April 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 309 (TC)
Judge Howard M. Nowlan, Harvey Adams
Liban Ahmed of Controlled Tax Management Limited appeared for the Appellant
Mrs. Sylvia Knibbs of HMRC appeared for the Respondents
Value added tax - Claim for the refund of input VAT by the self-builder of a dwelling - Whether the entitlement to refund was denied because the dwelling was constructed as two quite separate buildings, albeit that they were designed to operate as one dwelling - Appeal allowed
The First-tier Tribunal decided that a taxpayer's two buildings comprised one dwelling and that the dwelling itself satisfied the requirements of the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 2. It also ruled that VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1As. 35(1A) and VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 2 ("Note 2") could be read to refer to "a building or buildings" and accordingly, that the construction of the buildings qualified for the VAT refund under VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1 section 35 subsec-or-para 1Ass. 35(1) and (1A).
The taxpayer appealed HMRC's denial of his claim to recover value added tax ("VAT"), under VATA 1994, Value Added Tax Act 1994 section 35s. 35, on supplies rendered to him with respect to the construction of a dwelling house.
The taxpayer built a dwelling house in a very unusual format. It comprised of two seemingly totally separate buildings where the first one ("Unit 1") contained two bedrooms, a bathroom, a living-room and a kitchen. The other building ("Unit 2"), linked only by timber decking, contained two bedrooms, each with a door to the exterior decking, and each with access to the shared shower-room located between the two bedrooms. Unit 2 contained no other accommodation. All the services, including the supply of hot water, came from Unit 1.
The planning consent that was granted gave consent for the Construction of a four bedroom replacement dwelling. Condition 8 of the various conditions attached to the planning consent stated that: the approved accommodation shall not be occupied as separate units of accommodation at any time.
Under VATA 1994, Value Added Tax Act 1994 section 35s. 35, the taxpayer could recover VAT where he had borne VAT on supplies rendered to him, when acting in a non-business capacity, in undertaking works that involved the construction of a building designed as a dwelling.
While HMRC accepted that there was only one property and only one dwelling, they denied the taxpayer's claim on the basis that there were two buildings, HMRC argued that the two buildings did not comply with the tests provided for in Note 2. For example, the condition in Note 2, para. (c) was not satisfied as regards either unit, because neither building could be occupied as separate units of accommodation at any time, under the planning consent. Furthermore, Unit 2 might arguably also fail the condition in Note 2, para. (a) in that Unit 2 could hardly be said to consist of self-contained living accommodation. HMRC further countered the taxpayer's argument that the term building should be taken to refer to a building or buildings, either in the singular or plural, was not tenable since the VAT and Duties Tribunal already decided otherwise in WhiteleyVAT[1995] BVC 551.
The taxpayer contended that the two units were in reality one building, and under the Interpretation Act 1978 ("INA 1978"), the singular included the plural "unless the contrary intention appeared". He also alleged that it would be contrary to the spirit and intent of VATA 1994 for the VAT reclaim to be denied simply because one dwelling, which was plainly meant to be utilised as a single home, happened, for various reasons to be divided into two units.
The taxpayer also contended that, if the tests in the paragraphs of Note 2 were applied in relation to the dwelling as a whole, and not wrongly in relation to each separate Unit, the tests were then satisfied. For the dwelling as a whole plainly consisted of "self-contained living accommodation", and more relevantly paragraph (c) was then satisfied. For although there was a planning constraint on each Unit being occupied or owned as separate accommodation, there was no such constraint as regards the dwelling having to be occupied, or to remain in ownership, with some other dwelling.
(2) Whether the taxpayer's two buildings comprised a singular dwelling.
(3) Whether the word "building" should include the plural form "buildings" and should be interpreted together VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1As. 35(1A) and with Note 2.
(4) Whether the works undertaken in this case constituted "the construction of a building designed as a dwelling" so that they qualified for VAT refund under VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1 section 35 subsec-or-para 1Ass. 35(1) and (1A).
Held, allowing the taxpayer's appeal:
Note 2 provides that 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 terms 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.
The Tribunal found that, whilst there was a distinction between a building and a dwelling, the very wording of VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1As. 35(1A) and the wordings of Note 2 contemplated that a building might be designed as a "dwelling or a number of dwellings". Whilst this case was concerned with the reverse situation, namely whether it was cogent to say that one dwelling could consist of two buildings, the Tribunal considered that it could do so. The planning authority appeared to share the same belief as the consent was granted for the construction of a four bedroom dwelling and Condition 8 provided that the accommodation shall not be occupied as separate units of accommodation at any time.
The Tribunal explained that had Unit 2 not been built, Unit 1 would have ranked as a dwelling, and that it would have consisted of "self-contained living accommodation". Notwithstanding this, however, when the whole planning of the buildings envisaged that they would be occupied as a composite whole, and when the planners took the same approach and indeed required that state of affairs to remain indefinitely, it seemed plain that the two units must rank as one dwelling.
The Tribunal also said that the two units complied with the tests in Note 2. The dwelling contained "self-contained accommodation" and when the dwelling as a whole included both units, there was no planning or other requirement that precluded the integrated use of the units, and "the separate use of the dwelling". That was precisely what the planning consent actually required.
The Tribunal reached the conclusion that one dwelling could consist of two buildings.
It also agreed with the taxpayer that interpreting the word "building" to include the plural was consistent with the provision in INA 1978, rather than ruled out by some contrary intention. It rejected HMRC's argument with regard to the applicability of Whitely in that the case had materially different facts and quite different phrasing of the section and schedule in the then Value Added Tax Act 1983, and concluded that that case had no bearing on this present case.
The Tribunal agreed with the submissions of the taxpayer that VATA 1994 Value Added Tax Act 1994 section 35 subsec-or-para 1As. 35(1A) and Note 2 should be read together, to say: "The works to which this section applies are the construction of a building or buildings designed as a [single] dwelling or a building designed as a number of dwellings". It also discussed the provisions of both VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Notes 4 and 5 to the facts in the instant case since their provisions addressed the intended use of the building. In applying the reinterpretation mentioned above, it said that the word "building" should not colour the interpretation of the tests provided for in VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 5 when constructed or not to constitute a dwelling, since it had a different test precisely geared to how the building was used. It concluded that the works involved in this case satisfied the definition in VATA 1994 Value Added Tax Act 1994 section 35 subsec-or-para 1As. 35(1A) and Note 2.
1.This was an Appeal in which the facts will clearly be virtually unique.
2.The Appellant and his partner built a dwelling house in the very unusual format that it comprised two seemingly totally separate buildings. One building (referred to as "Unit 1") contained two bedrooms, a bathroom, a living-room and a kitchen. The other building ("Unit 2"), linked only by timber decking, but being only one metre away from Unit 1 at the closest point, contained two bedrooms, each with a door to the exterior decking, and each with access to the shared shower-room located between the two bedrooms. Unit 2 contained no other accommodation, in other words no sitting-room or kitchen. All the services, including the supply of hot water, came from Unit 1.
3.It was said that when the architect was asked to design the house, he had been asked to build a four-bedroom house. We find it slightly implausible that an architect would have designed the rather unusual "two-box" house without any intimation...
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