Colaingrove Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 August 2012 |
| Neutral Citation | [2013] UKFTT 312 (TC) |
| Date | 06 August 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 312 (TC)
Judge Charles Hellier, Tym Marsh.
Roderick Cordara QC instructed by PwC Legal LLP appeared for the Appellant
Jeremy Hyam, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
VAT - zero rating - caravans - removable contents - Value Added Tax Act 1994 ("VATA 1994") Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, item 1 and note(a) - apportionment of consideration for supply. Decision in principle.
The First-tier Tribunal decided that the use in ordinary speech of the word "caravan", and the adjacent description in VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9 of a houseboat as a place of habitation indicated that "caravan" was intended to mean something capable of habitation. Thus, its "removable contents" should be restricted to those things whose removal did not make it unfit for habitation. In respect of the "fitted furniture", the test was whether removable content was of "a kind" with building materials, and, thus, whether the particular items were of a kind with what in a house would be fitted furniture.
The taxpayer company sold static caravans, which had generally always been sold complete with fixtures and fittings. It appealed against HMRC's decisions rejecting its voluntary disclosures of overpaid VAT for periods between March 2007 and June 2007 and also against a number of VAT assessments for quarters encompassed in the same period. A dispute reflected in those appeals related to the extent of the zero rating provided by VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9 in respect of the extent of the exemption from zero rating for the "removable contents" of a caravan.
HMRC contended that VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, note (a) spoke of removable contents other than building materials which were items incorporated into the building. The exclusion from removable contents of items incorporated into a structure indicated that "removable content" included the full range of items which might be incorporated into the structure. The words and their context indicated that "removable contents" meant everything other than the shell of the caravan. Thus, all fitted furniture and fixtures were removable contents. The object of VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, note (a) was to secure parity between VAT born by the purchaser of a dwelling, which was a house, and the purchaser of a caravan to dwell in. The declared intention of the provision at the time of its original enactment in 1972 was "to treat caravans intended as residential accommodation in the same way as houses". That parity meant that excluded building materials in a house, on which standard-rated VAT was borne as a result of VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, note (22) and the blocking order should also be standard-rated when in a caravan. Thus, removable contents should be construed to include anything which was excluded builders materials.
The taxpayer contended that the object of VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9 was to zero-rate a caravan, not a bare unfinished shell of a caravan devoid of the normal appurtenances of domestic life. Thus, "removable contents" was limited to that which was easily removable and replaceable and which did not play any structural role in the caravan. What was excluded was the contents of the caravan. The fabric of the caravan was not the "contents" of the caravan. Things which formed an integral part of the caravan were not the contents of a caravan. If a fixture made a contribution to the structure of the caravan, it could not be "contents" even if it was not essential to the structural integrity of the caravan.
The Tribunal held that the exclusion by VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, note (a) was of "removable contents", not "removable items". The word "contents" indicated that after removal, what was left behind should recognisably be a caravan. Thus, "removable contents" was narrower than "anything which [could] be removed". That gave meaning to "contents". The use in ordinary speech of the word "caravan", and the adjacent description in VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9 of a houseboat as a place of habitation indicated that "caravan" was intended to mean something capable of habitation and that its "removable contents" should be restricted to those things whose removal did not make it unfit for habitation. Thus, lavatories, washbasins, kitchen sinks, walls, partitions, windows, doors, lighting fixtures and items, which were necessary for safety and structural suitability, were not removable contents.
In respect of the "fitted furniture", the Tribunal considered the following factors: (1) if an item was part of the building, rather than something attached to it, was less likely to be fitted furniture (C & E Commrs v McLean Homes Midland LtdVAT[1993] BVC 99 and "Leon")VAT[1996] BVC 4094, considered); (2) the type of function which the item performed (Edmond Homes LtdVAT[1995] BVC 1368, considered); (3) the greater the complexity or sophistication of the design or construction of the item, the more likely it was to be fitted furniture (WadeVAT[1996] BVC 4085 and Leon, considered); (4) an item which furnished a rooms such as picture rails and carpets, was not necessarily furniture; and (5) the impression of whether an item was fitted furniture should be given from looking at the item in situ, i.e. fully constructed and in its final place. In applying those indicators in the context of VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, the test was whether removable content was of "a kind" with building materials, and, thus, whether the particular items were of a kind with what in a house would be fitted furniture.
This decision is helpful to taxpayers claiming for overpaid VAT in relation to the zero rating under VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9. The decision discusses the extent of exemption from zero rating for the "removable contents" of a caravan and the principles applied in relation thereto. For commentary on zero-rating for caravans and houseboats under VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, see CCH British Tax Reporter at ¶22-775.
[1]Among other activities, Colaingrove sells static caravans. This decision concerns the scope of the zero rating afforded by Value Added Tax Act 1994 schedule 8 group 9Group 9 Schedule 8 VAT act 1994 to such caravans, and the proportion of their sale price which is to be treated as standard rated.
[2]The appellant has appealed against decisions of HMRC to reject voluntary disclosures of overpaid VAT for periods between 03/07 and 06/07 and also against a number of VAT assessments for quarters encompassed in the same period. The total VAT at issue is some £38 million. The dispute between the parties reflected in those appeals relates to the extent of the zero rating provided by Value Added Tax Act 1994 schedule 8 group 9Group 9 in two respects: (1) the extent of the exemption from zero rating for the "removable contents" of a caravan, and (2) the proper VAT treatment of verandahs attached to caravans. This is a decision in respect of the principles to be applied in relation the first issue only; thus formally it is decision on a preliminary issue.
[3]The first issue divided into qualitative and a quantitative questions. The qualitative issue was the meaning and effect of Value Added Tax Act 1994 schedule 8 group 9Group 9 Schedule 8 VATA - the scope of the zero rating of caravans. We were provided with a schedule of 20 items which were included in caravans sold by the appellant. These included fitted cupboards, corner units, mirrors and sofas. We were asked to bear these items in mind and to apply our conclusions on the legislation and the evidence to some of these 20 items.
[4]A quantitative issue arose as well. It was how to apportion the sale price between the standard and zero rated items. The arguments on this issue depended to some extent on our conclusions on the qualitative issue.
[5]The remainder of this decision is divided as follows:
IIQualitative issues
(2) The Legislation
-
(3) Findings of Fact
(a) Caravans and Colaingrove
(b) Munufacture of caravans
(c) Ease of removal
(d) Structural Stability
(4) Our Conclusions:
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(a) Removable contents:
(i) policy and parity,
(ii) the words in context,
(iii) ordinary meaning,
(iv) summary
(b) Goods of a kind
(c) Ordinarily
(d) Fitted Furniture
(5) Summary
IIIQuantitative Issue - apportionment
1 Background
3 Evidence from the valuers
4 The competing methods of apportionment
IV. Rights of appeal
[6]The legislative framework is beset by exceptions to exceptions to exceptions. Caravans are zero rated. But this zero rating does not include their "removable contents". Removable contents in turn does not include goods which are of a kind with what we shall call "ordinary building materials"; "ordinary building materials" does not include certain items such as furniture, gas appliances or carpets and in turn these are subject to certain exceptions for fitted kitchen furniture and space heaters.
[7]In Value Added Tax Act 1994 schedule 8Schedule 8 VAT Act 1994, which sets out items to which zero rating applies, Value Added Tax Act 1994 schedule 8 group 9Group 9 currently provides:
Item No
(2) Caravans exceeding the limits of size the time being permitted for use on roads of a trailer drawn by a motor vehicle having an unladen weight of less than 2030 kg. [These are the static caravans to which this appeal relates.]
(3) Houseboats being boats or...
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