Commissioners of Customs and Excise v Arnold
| Jurisdiction | England & Wales |
| Judgment Date | 30 July 1996 |
| Date | 30 July 1996 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Hidden J.
Paul Lasok QC (instructed by the Solicitor for Customs and Excise) for the Crown.
John Walters (instructed by Horwood & James, Aylesbury) for the taxpayer.
The following cases were referred to in the judgment:
British Teleflower Service Ltd VAT(LON/94/1325) No. 13,756; [1996] BVC 2587
C & E Commrs v JH Corbitt (Numismatists) Ltd ELRVAT[1981] AC 22; (1979) 1 BVC 251 (CA), 330 (HL)
C & E Commrs v John Dee Ltd VAT[1995] BVC 361
C & E Commrs v Lewis VAT[1994] BVC 201
C & E Commrs v London Diocesan Fund VAT[1993] BVC 123
C & E Commrs v Marchday Holdings Ltd VAT[1995] BVC 335
C & E Commrs v United Biscuits (UK) Ltd (t/a Simmers)VAT[1992] BVC 54
C & E Commrs v Viva Gas Applications Ltd WLRVAT[1983] 1 WLR 1445; (1983) 1 BVC 588
Dollar Land (Feltham) Ltd v C & E Commrs VAT[1995] BVC 115
Edwards (HMIT) v Bairstow ELR[1956] AC 14
Farm Facilities (Fork Lift) Ltd VAT(1987) VATTR 80; (1987) 3 BVC 567
G McKenzie & Co Ltd VAT(LON/92/2015) No. 11,992; [1995] BVC 827
Purdue VAT(EDN/94/511) No. 13,430; [1996] BVC 4138
R v IR Commrs, ex parte MFK Underwriting Agencies LtdWLRTAX[1990] 1 WLR 1545; [1989] BTC 561
R v IR Commrs, ex parte Preston ELRTAX[1985] 1 AC 835; [1985] BTC 208
R v IR Commrs, ex parte Unilever plc TAX[1996] BTC 183
Vincett VAT(LON/93/233) No. 10,932; [1994] BVC 1401
Value added tax - Extra-statutory concession applied to conversions completed after 21 April 1994 - Refund of VAT for goods supplied for DIY conversion of a building to a dwelling - Jurisdiction of tribunal - Whether tribunal had jurisdiction to decide whether taxpayer came within terms of concession - Whether Customs' decision not to apply concession in favour of taxpayer was appealable - Whether work "completed" before 21 April 1994 - Whether taxpayer entitled to refund without relying on concession - Value Added Tax Act 1983, s. 21, as amended by the Finance Act 1989, replaced by Value Added Tax Act 1994 section 35 section 83 subsec-or-para (g) section 84 subsec-or-para (10)Value Added Tax Act 1994, s. 35 - Value Added Tax Act 1994, s. 83(g), 84(10).
This was an appeal by Customs against a decision of the tribunal (Chairman Dr AN Brice (LON/95/1763) No. 13,843; [1996] BVC 2656) that the taxpayer was entitled to the benefit of an extra-statutory concession which anticipated legislation allowing the refund of VAT paid in respect of supplies in connection with a do-it-yourself conversion of a building to a new dwelling.
In 1992 the taxpayer began to convert a barn into a dwelling for his own occupation in his spare time. Most of the goods and services which he used were supplied during 1992 and 1993. In August 1993 the property was registered for council tax and the taxpayer entered into occupation. In 1994, further minor work was done to the drains which resulted in two invoices for supplies to the taxpayer. In November 1994 the local authority certified that all the work was complete.
On the basis of the concession, expressed to apply to conversions completed after 21 April 1994, the taxpayer claimed recovery of VAT amounting to £6,893.98 which he had paid in the course of converting the property. Customs refused to apply the concession in the taxpayer's favour on the ground that the conversion work had been complete when he occupied the building in August 1993.
On the footing that it had jurisdiction to consider Customs' decision to withhold the concession, the tribunal decided that the conversion work was not completed until the council certified completion after 21 April 1994 and accordingly that the concession should have been applied.
Customs contended that the tribunal was not entitled to consider the matter. The jurisdiction of the tribunal was defined in the Value Added Tax Act 1994, s. 83 by reference to the decisions or measures which might be challenged before it. The matters which might be appealed did not include a decision as to the application of an extra-statutory concession. That was a discretionary decision and the only challenge to such a decision would be on the grounds of unreasonableness by way of judicial review.
Customs further contended that, even if the tribunal had jurisdiction, the concession was not available to the taxpayer because the conversion was completed before 21 April 1994 when he first occupied the dwelling.
The taxpayer sought to uphold the decision of the tribunal that it had jurisdiction under Value Added Tax Act 1994 section 84 subsec-or-para (10)s. 84(10) of the 1994 Act, enabling an appeal to be brought against a decision of Customs which depended on a prior decision in relation to the appellant, not appealable under s. 83.
The taxpayer further contended in the alternative that he was entitled to a refund without recourse to the concession. The appeal was underValue Added Tax Act 1994 section 83 subsec-or-para (g)s. 83(g) of the 1994 Act against a decision of Customs on the interpretation of the Value Added Tax Act 1994 section 35Value Added Tax Act 1994, s. 35 permitting refunds for "a person constructing a dwelling" and not against a refusal to apply the concession. The words "a person constructing a dwelling" in Value Added Tax Act 1994 section 35s. 35 were capable of including persons who were converting a building to a dwelling. It was not necessary that in constructing a building the work had to start from a vacant site if a new building was created. The question was one of fact and degree and the case should be remitted to the tribunal to consider the case on that basis.
Held, allowing Customs' appeal:
1. The claim could not be regarded as a claim under the statutory provisions apart from the concession. The refund provisions for DIY dwellings were linked by s. 21(1)(b) of the 1983 Act, as amended by the Finance Act 1989 (the predecessor of s. 35), to the zero-rating provisions for construction of dwellings in Grp. 8 of Sch. 5 to the 1983 Act, and Note (9) to that group which excluded conversion of an existing building. The conversion of the barn would not have been zero-rated and therefore the taxpayer was not entitled to a refund of input tax.
2. Two decisions were envisaged by Value Added Tax Act 1994 section 84 subsec-or-para (10)s. 84(10) of the 1994 Act (the decision appealed against and the decision on which it depended). There was no dependency between the decision in relation to the concession and the decision in relation to the statutory refund.
3. The jurisdiction of the tribunal was appellate, not supervisory. But if it had been entitled to exercise a supervisory jurisdiction, the matter could only have been approached by asking whether Customs' decision had been irrational, unfair or if a legitimate expectation had been disappointed, which could not be said of Customs' conduct in this case.
4. No conversion work was done in 1994 and accordingly the tribunal, even if it had jurisdiction, erred in law in concluding that the taxpayer came within the concession.
Hidden J: This is an appeal from the decision of the VAT tribunal released on 16 January 1996 in an appeal under Value Added Tax Act 1994 section 83s. 83 of the Value Added Tax Act 1994. The appeal is brought by Customs who raise in their notice of motion three errors of law alleged against the tribunal. In the first, it is said that the tribunal asserted jurisdiction to decide whether or not the taxpayer came within the terms of an extra-statutory concession. In the second the error of law is said to be in the tribunal's holding that Customs were wrong not to apply the extra-statutory concession to the taxpayer. The third error of law is that it is said that no reasonable tribunal could have found that the property in question was not complete. The case before the tribunal proceeded on the basis that the taxpayer had no claim as a matter of law to have the decision of Customs reversed because the taxpayer's claim was based on an extra-statutory concession.
The facts in this case are simplicity itself when taken in comparison with the law. In about 1992 the taxpayer began to convert a barn into a dwelling for his own occupation. It was during 1992 and 1993 that the majority of the goods and services supplied in the course of the conversion of the barn were supplied. In August 1993 the property was registered for council tax and the taxpayer entered into occupation. At that stage three bedrooms and two bathrooms were completely finished. The taxpayer continued to do further work to the property and did minor work in relation to the drains which resulted in the creation of two invoices relating to supplies to the taxpayer which were dated in 1994. One was for the sum of £17.26 and the other was for £545: both were dated in August 1994. By letter dated 13 November 1994 the Council wrote that all works were considered complete, they having inspected the property five days earlier. On 12 December 1994 the taxpayer claimed a return of £6,893.93 VAT charged to him in respect of the conversion of the property. The claim was on a form VAT 431. He made the claim on the basis of an extra-statutory concession announced on 21 July 1994 which concession applied only to DIY conversions completed after 21 April 1994. By letter dated 17 February 1995 Customs rejected the taxpayer's claim and the taxpayer appealed to the VAT tribunal against that decision.
Schedule 7 to the Value Added Tax Act 1983, para. 1(1) says:
The tax shall be under the care and management of the Commissioners.
The same words appear in Value Added Tax Act 1994Sch. 11 to the 1994 Act. Accordingly, Customs (but not a person other than Customs and therefore not the tribunal) may by concession relieve a taxpayer of a tax liability imposed by law, subject to judicial review of any such concession under O. 53 of the Rules of the Supreme Court 1965 (SI 1965/1766).
On 21 July 1994...
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