Commissioners for Customs and Excise v Zielinski Baker and Partners Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 15 March 2001 |
| Date | 15 March 2001 |
| Court | Chancery Division |
Chancery Division.
Etherton J.
P Harris (instructed by the solicitor for the commissioners of Customs and Excise) for the Crown.
Phillip Brunt (instructed by the solicitor for Francis Clarke Chartered Accountants) for the respondent.
The following cases were referred to in the judgment:
Batey (HMIT) v Wakefield TAXUNK(1981) 55 TC 550; [1982] 1 All ER 61
EC Commission v Germany (Case 107/84) [1985] ECR 2655
EC Commission v Netherlands (Case 235/85) [1987] ECR 1471
EC Commission v United Kingdom VAT(Case 416/85) (1988) 3 BVC 378
Ford VATNo. 16,271; [2000] BVC 4028
Hardy VATNo. 12,776; [1996] BVC 2057
Institute of the Motor Industry v C & E Commrs VAT(Case C-149/97) [1999] BVC 21
Lewis (HMIT) v Lady Rook TAX[1992] BTC 102
Lister v Fourth Dry Dock & Engineering Co LtdWLR[1989] 2 WLR 634
Mann VATNo. 14,004; [1996] BVC 4273
Marleasing SA v La Commercial Internacional de Alimentación SA (Case C-106/89) [1990] ECR 1-4135
Morfee VATNo. 13,816; [1996] BVC 2635
Orme VATNo. 9975; [1993] BVC 1533
Pickstone v Freemans plc ELR[1989] 1 AC 66
Powell v Cleland ELR[1948] 1 KB 262
Skerrits of Nottingham Ltd v Secretary of State for the Environment, Transport and the Regions WLR[2000] 2 WLR 511
Stichting Uitvoering Financiële Acties (SUFA) v Staatssecretaris van Financiën VAT(Case 348/87) [1991] BVC 102; [1989] ECR 1737
Von Colson and Kamann v Land Nordrhein-Westfalen (Case 14/83) [1984] ECR 1891
Whiteley VATNo. 11,292; [1995] BVC 551
Williams (HMIT) v Merrylees TAX[1987] BTC 393
Value added tax - Zero-rating - Protected building - Whether two separate structures could constitute a single "building" - Value Added Tax Act 1994, Sch. 8, Grp. 6.
The taxpayers were involved in development work within the grounds of a listed building which included the conversion of an outbuilding into a games and changing facility. The main house was a "protected building" within Value Added Tax Act 1994 schedule 8 group 6Sch. 8, Grp. 6 of the Value Added Tax Act 1994 and so alterations to it were zero-rated.
Whether the outhouse was part of the "protected building".
Held, allowing Customs' appeal:
On the proper construction of Value Added Tax Act 1994 schedule 8 group 6Grp. 6 a "protected building" had to be a single building which comprised one or more dwellings. The Interpretation Act 1978 provided that the singular included the plural unless contrary intention appeared, and there were several indications in the Value Added Tax Act 1994 of such a contrary intention inValue Added Tax Act 1994 schedule 8 group 6Grp. 6, Sch. 8. This conclusion was reinforced by the decisions of the ECJ which required a strict construction of exemptions.
Etherton J: The appeal
1. This is an appeal by the Commissioners of Customs and Excise ("the appellants") from the decision of the Birmingham VAT & duties tribunal ("the tribunal") made on 4 July 2000 (No. 16,722; [2001] BVC 2059), by which it allowed an appeal by Zielinski Baker and Partners Ltd ("the respondents") against an assessment of Value Added Tax ("VAT") raised by [them] on 9 September 1997. The assessment was in the total sum of £77,681, of which the disputed element is £32,639.31.
2. The respondents are project managers, building surveyors, planning and development consultants and registered house builders. In 1994 they were instructed by Mr and Mrs Gerald Dutton, owners of The Mere, Bedford Road, Little Houghton ("the house") to prepare and oversee a scheme ("the scheme") for a major development within the grounds of the house. The house is a listed building. The scheme included the construction of a detached bungalow for Mrs Dutton's mother, Mrs Arrowsmith, and a detached triple garage. It is accepted by the respondents that those works should all be standard rated. The disputed element of the assessment arises out of the appellants' assertion that the remainder of the project, the conversion of an outbuilding ("the outbuilding") into games and changing facilities and the construction of an adjoining indoor swimming pool, should also be standard rated. The respondents maintain that those works constitute approved alterations to a "protected building" and, as such, qualify for zero-rating. The chair of the tribunal, Mrs CJ Mitting, agreed with the respondents and so allowed their appeal against the assessment.
3. The following facts were found by the tribunal and are not in dispute before me. I set out the relevant paragraphs of the tribunal's decision:
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6. Mere Court ("the house") was erected in about 1830 as a dower house for a much large[r] estate. It is a listed building. It is a large two storied house facing west. The front and the north and the south facing sides are built of red brick and are covered with stucco, the back of the house being built of sandstone. Slate and timber are also used throughout the construction. The northern side of the house (i.e. the left as one faces it) incorporated a wing for servants, now occupied as separate dwellings.
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7. To the rear of the house and touching the east/south corner is the beginning of a wall, approximately 9 feet high and 15 feet long. The wall runs eastwards, i.e. directly away from and at right angles to the back of the house. The wall was built at the same time as the house and was also built of sandstone. The far end of the wall touched into the outbuilding which is central to this dispute. The wall does not have and indeed never did have any structural purpose and was described by Mr Dutton in his evidence as aesthetic.
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8. The outbuilding was also built of sandstone at the same time as the house. It was in essence a long narrow building, its long sides facing east and west and the wall therefore linked into the corner between the long west wall and the short northern wall. I was shown an extract from an 1885 ordinance survey map. This clearly showed the house, the wall and the outbuilding and there was also pointed out to me another outbuilding since demolished because it was unsafe which had been built directly behind the house and parallel to it, the short southerly wall of which ran along side the northern wall of the disputed outbuilding. There was therefore in effect a courtyard at the back of the house formed by the back wall of the house, the back of the servants' quarters on its left, the now demolished outbuilding at the top and the wall on its right-hand side.
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9. In 1945 Mr Dutton's father, Mr Arrowsmith, took over the tenancy of Mere House and from it farmed about 1800 acres. He purchased the house in 1954 and continued to live there with his wife and family until his death. After his death, Mrs Arrowsmith continued to live in the house which was eventually sub-divided into three self contained units of which she occupied the largest and the other two were tenanted. The tenancies fell in and in 1984 Mr and Mrs Dutton purchased the property from Mrs Arrowsmith and the house was returned to one single residential unit, Mrs Arrowsmith moving out to the newly constructed bungalow in the grounds when it was ready for her occupation.
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10. The outbuilding appears to have had various uses over the years. In its early years it was used as a tack room, it stabled the family's horses and housed the family's carriage. It also housed the scullery. In 1945 for about 12 months, a Romanian refugee lived in the scullery until he met and married an English girl and this is the only known residential use of the building. At the time of the Dutton's purchase, the outbuilding was divided up. A part of it was used as a garage in which Mrs Arrowsmith garaged her car, a part of it was a tack room which I understand was used for storage and the old scullery was used as a laundry and to house her freezer. There was also a potting shed attached.
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11. As far as Mr Dutton knew mains water and electricity had been run to the outbuilding ever since they were introduced to the house and from the same common supply. Gas had not been supplied to the outbuilding until recently when it was supplied as part of the conversion. Before mains water was available the house and outbuildings were both supplied from a series of wells.
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12. When the Duttons purchased the property, application was made on their behalf by the appellants for permission, inter alia, to construct an indoor swimming pool and convert the outbuilding into changing and games facilities. Because the swimming pool was going to extend quite extensively beyond the outbuilding, permission was also sought and granted to take down two trees which had been situated immediately behind the scullery. Because the house was a listed building and the outbuilding was within its curtilage, listed building consent was necessary for the proposed works and this was granted on the 30 August 1995, consent being given to "construction of indoor swimming pool and conversion of existing barn into changing and games facilities together with detached garage at The Mere, Bedford Road, Little Houghton".
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13. I was shown a plan of the new complex which is a two storey structure consisting of a billiard room, plant room and changing room on the ground floor with a games room overhead. Attached is a single-storey area housing the swimming pool.
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14. The linking wall between the house and the building remained, as it had always stood, although some renovation to it has had to be done, and specifically what had been just an opening in the wall in 1994 had a gate inserted into it. It should be noted that the opening did not go to the top of the wall and did not form any break in it. A cornice was also added over the gateway to match the house.
4. The current legislation imposing a charge to VAT is contained in the Value Added Tax Act 1994 as amended ("the 1994 Act").Value Added Tax Act 1994Section 1(1) of the 1994 Act provides that VAT...
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Commissioners for Customs and Excise v Zielinski Baker and Partners Ltd
...Value Added Tax Act 1994 schedule 8 group 6Sch. 8, Grp. 6. This was an appeal by the taxpayer against a decision of the High Court ([2001] BTC 5168) that the alterations to an outbuilding within the curtilage of a listed building were not alterations to a protected building and so were not ......