Commissioners of Customs and Excise v Morrison Dunbar Ltd & Mecca Ltd

JurisdictionEngland & Wales
Judgment Date05 July 1978
Date05 July 1978
CourtQueen's Bench Division

Queen's Bench Division.

Customs and Excise Commissioners
and
Morrison Dunbar Ltd. & Mecca Ltd

Mr. H. Woolf (instructed by the Solicitor for Customs & Excise) for the Crown.

Mr. I. Richards (instructed by Messrs. Jansons) for Mecca.

Before: Neill J.

Value added tax - Zero-rating - Conversion of a cinema into a bingo hall - Whether works repair or maintenance - Works including redecoration and remedial work - Whether supply of services apportionable - section 12 subsec-or-para (1) schedule 4 group 8Finance Act 1972, sec. 12(1), Sch. 4, Grp. 8, item 2, Note (1) (now section 16 subsec-or-para (1) schedule 5 group 8sec. 16(1), Sch. 5, Grp. 8, item 2, Note (1)).

The Crown appealed from a decision of the London VAT Tribunal which allowed an appeal in part by the taxpayer company from a decision by the Commissioners that work carried out to convert a cinema into a bingo hall was taxable at the standard rate and the taxpayer company cross-appealed.

Mecca Ltd. ("Mecca") procured the conversion of a cinema into a bingo hall. The work was undertaken by Morrison Dunbar Ltd. who apportioned their charges into those relating to zero-rated supplies and those relating to supplies taxable at the standard rate. The Commissioners ruled that the work done by Morrison Dunbar Ltd. was taxable at the standard rate in its entirety. Both Mecca and Morrison Dunbar appealed to a VAT Tribunal. Before the hearing of the appeal the Commissioners agreed with Morrison Dunbar Ltd. that part of the work should be zero-rated and part should be standard-rated. Mecca did not accept this agreement and some 29 items came into dispute before the Tribunal. Mecca contended that the work done should be considered as a single supply being the conversion of a cinema into a bingo hall and that all the work therefore fell to be treated as the "alteration of a building" and so zero-rated. The Tribunal examined all the 29 items in detail and concluded that 20 of them were zero-rated as works of alteration. The Crown appealed contending that the Tribunal had erried in its construction of schedule 4 group 8Finance Act 1972, Sch. 4, Grp. 8 and Mecca cross-appealed contending that the Tribunal had been wrong to look at individual items and treat them as a number of supplies.

Held, allowing the Crown's appeal and dismissing the taxpayer's cross-appeal:

1. It was proper for the Tribunal to look at each item separately because the Tribunal had to decide what actual services had been supplied and then consider whether those services fell to be zero-rated.

2. The Tribunal had erried in its construction of the schedule 4 group 8Finance Act 1972, Sch. 4, Grp. 8 because the word "alteration" meant a structural alteration to a building and the Tribunal should therefore have looked at the services which were supplied to decide whether those services were supplied in the course of the construction or structural alteration of the building. Services which amounted to a supply in the course of the construction or alteration of a building were to be zero-rated except insofar as they included any work or repair or maintenance. Consequential work which flowed directly from works of construction and alteration, such as touching-up or repainting, would also qualify for zero-rating. The case would therefore be remitted to the Tribunal for reconsideration.

JUDGMENT

Neill J.: The Commissioners of Customs and Excise appeal to the Court against a decision of a VAT Tribunal sitting in London on 6 July 1976. The decision is dated 2 August 1976. In addition, there is a cross-appeal against that decision by Mecca Limited.

The matter came before the Tribunal by way of an appeal by Mecca Limited and a company called Morrison Dunbar Limited against a decision of the Commissioners contained in a letter dated 18 February 1976. Morrison Dunbar Limited did not take any part either in the proceedings before the Tribunal or in this Court and I am therefore concerned only with an appeal by the Commissioners and a cross-appeal by Mecca Limited.

Mecca Limited carry on business in the entertainment industry. One of their activities is the operation of bingo halls and social clubs. They have a subsidiary company called Mecca Developments Limited which deals with all new projects for the Mecca Group. Mr. Alan Barbour is the Managing Director of Mecca Developments Limited.

In 1972 Mr. Barbour, who was then in charge of the Design and Construction Department of Mecca Developments Limited, negotiated the purchase of the Bedford cinema in Glasgow for £90,000 from a company called George Green Limited. The cinema had a capacity, as a cinema, of just over 2000 persons which meant it was large enough for conversion into a bingo hall. Mr. Barbour considered it only in that connection. The offer of £90,000 was made contingent on Mecca Developments Limited taking a bingo licence under the Gaming Act because, in the absence of such a licence, the property would have been useless to the appellant company.

In addition to the £90,000 purchase price, Mecca Limited spent just over £150,000 on converting the property into a bingo hall of which the major part related to a contract with Morrison Dunbar Limited who carried out a substantial part of the work. This appeal is concerned with the work which Morrison Dunbar Limited carried out for Mecca.

Morrison Dunbar submitted an account to Mecca dated 15 November 1974. In that account, the various items of work carried out by Morrison Dunbar were specified and the charges in respect of the claims were set out in two columns. One column was headed "Allocation of zero-rated supplies - Demolitions & Alterations"; the other column was headed "Allocation of Positive-rated Supplies Repairs and maintenance & excepted Materials and good". The reason for the two columns is to be found in the provisions of the Finance Act 1972 to which I now turn. section 1 subsec-or-para (1)Section 1(1) of the Act imposes a tax to be known as VAT, to be "charged in accordance with the provisions of this Part of this Act on the supply of goods and services in the United Kingdom" and, by section 2 subsec-or-para (2)sec. 2(2):

Tax on the supply of goods or services shall be charged only where:

  1. (a) the supply is a taxable supply; and

  2. (b) the goods or services are supplied by a taxable person in the course of a business carried on by him; and shall be payable by the person supplying the goods or services.

Halting there, it is not in dispute that the carrying out of building work by Morrison Dunbar Limited was a taxable supply of services and the supply of any building materials, supplied in connection therewith, constituted a taxable supply of goods. The question in issue is the rate of tax. Mecca Limited say that the rate should be nil; the...

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13 cases
  • A.C.T. Construction Ltd v Commissioners of Customs and Excise
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 9 October 1980
    ...First, I would like to mention the word "alteration" in the opening sentence. Mr. Justice Neill, in the case of The Commissioners of Customs and Excise v. Morrison Dunbar Ltd., decided on the 5th July, 1978, said: 29 "…that the alteration to which item 2 applies is an alteration of the buil......
  • A.C.T. Construction Ltd v Commissioners of Customs and Excise
    • United Kingdom
    • House of Lords
    • 3 December 1981
    ...as the other. 13My Lords, the meaning of "alteration" in this context had arisen in a previous Value Added Tax case, Customs and Excise Commissioners v. Morrison Dunbar Ltd. [1979] STC 406, a decision by Neill J. about a fortnight before the hearing of the instant case before the Value Add......
  • Sharman
    • United Kingdom
    • Queen's Bench Division
    • 21 October 1983
    ...I find it convenient to review some of the authorities under this item. The first of these is C. & E. Commrs. v. Morrison Dunbar Ltd. UNK[1979] STC 406, a decision of Neill J. In that case a cinema had been purchased which the purchaser wished to convert into a bingo hall. The question aros......
  • C Neary Ltd
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 1 June 2016
    ...the building. In reaching this conclusion, the House of Lords followed the reasoning of Neill J in C & E Commrs v Morrison Dunbar Ltd VAT(1978) 1 BVC 165, where the position of the word “alteration” between the words “construction” and “demolition” suggested to the Judge that, in order to b......
  • Request a trial to view additional results

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