Commissioners of Customs and Excise v Great Shelford Free Church (Baptist)
| Jurisdiction | England & Wales |
| Judgment Date | 03 April 1987 |
| Date | 03 April 1987 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Mr. John Laws (instructed by the Solicitor of Customs and Excise) for the Crown.
Mr. Philip Lawton Q.C. (instructed by Messrs. Ellis & Fairbairn) for the church.
Before: Kennedy J.
The following cases were referred to in the judgment:
Church of Scientology of California v. C. & E. Commrs.UNK[1979] STC 297
C. & E. Commrs. v. Perry TAXVAT[1983] BTC 5017; (1983) 1 BVC 541
Edwards (H.M.I.T.) v. Bairstow & Anor. ELR[1956] A.C. 14
Ransom (H.M.I.T.) v. Higgs WLR[1974] 1 W.L.R. 1594
Value added tax - Zero-rating - Construction of building - Church hall built attached to church - Whether construction of new building or enlargement of existing building -Value Added Tax Act 1983 schedule 5 group 8Value Added Tax Act 1983, Sch. 5, Grp. 8, item 2, Note 1A.
This was an appeal by the Crown from the decision of a VAT Tribunal that the construction of a church hall and other accommodation attached to a church was a new building, and not an "enlargement" of the church.
In 1984 a temporary building next to the church was replaced by a church hall and classrooms, with kitchen and toilet facilities, attached to the church. There was a common entrance through a new lobby to both the church and the new accommodation. Both were served by common services. The planning permission described the work as "extensions" to the church.
The Commissioners of Customs and Excise took the view that the building work was the enlargement of the existing building, within theValue Added Tax Act 1983 schedule 5 group 8Value Added Tax Act 1983, Sch. 5, Grp. 8, item 2, Note 1A. The Note (added by the Finance Act 1984) excluded the enlargement of an existing building from zero-rating from 1 June 1984; work done after that date was taxable at the standard rate.
The church appealed to a VAT Tribunal contending that the new accommodation was a separate building and not an enlargement. The Tribunal decided in favour of the church because the existing building remained functionally independent of the new building which was completely different in concept and function; the fact that, for architectural and administrative reasons, the new building was "tied into" the old one was not considered very significant.
The Crown appealed to the High Court contending that the Tribunal had erred in law because it had failed to recognise that the undisputed facts pointed to only one conclusion, namely that the building work was the "enlargement" of an existing building. It was submitted that the planning permission for "extensions", the common entrance and services, and the lack of physical separation all pointed to an enlargement of the church. Moreover, the Tribunal's finding that the tying-in of the new building to the old was not of very much significance, disclosed a defective process of reasoning since contiguity was all-important.
The church contended that, considering the ordinary English words, the "enlargement of any existing building", the Tribunal's decision disclosed no error of law.
Held, dismissing the Crown's appeal:
The case was a borderline one but the Tribunal was entitled to come down on the taxpayer's side of the border; there was evidence to support the conclusion that the building work was a new building and not an enlargement of the church. The work done after 1 June 1984 was therefore zero-rated.
By notice of motion dated 4 July 1985, the Commissioners of Customs and Excise appealed against a decision of a VAT Tribunal made at Cambridge on 7 June 1985, for an order that the decision be set aside, and that the decision of the Commissioners dated 14 September 1984 that the carrying-out of building works was not entitled to be zero-rated, be upheld. The grounds of the appeal were:
1. The Tribunal erred in law in treating the fact that the new structure was "tied into" the old one as being of little significance.
2. The Tribunal erred in law in treating the motivation of the Great Shelford Free Church (Baptist) in providing "new facilities not available in the past" and erecting "a new hall with proper facilities at the rear of the site" as determinative of entitlement to zero-rating relief.
3. On the undisputed primary facts, the conclusion that the said works were not an enlargement of the existing building was a finding which no reasonable tribunal properly directing itself could make.
Kennedy J.: This is an appeal on a point of law under the provisions of the Tribunals and Inquiries Act 1971, against a decision of the London VAT Tribunal sitting at Cambridge, which, on 7 June 1985, allowed the appeal of the taxpayer against a decision of the Commissioners of Customs and Excise dated 14 September 1984.
The issue for the Tribunal
The issue between the parties arose in this way. The Great Shelford Baptist Chapel was built early in the nineteenth century. In the late nineteenth century, a vestry was added to the east end of the building. Later on, a small temporary hall was erected, and some Portakabin classrooms. In 1984, it was decided to build a new and larger hall with proper cooking and toilet facilities. It was to be sited at the back of the existing buildings, and in place of the temporary hall. Planning permission was obtained, and about one-third of the work had been done by 1 June 1984. That date is material because Finance Act 1984 section 10sec. 10 of the Finance Act 1984 provides that certain supplies are taxable if they were made on or after that date. The building work proceeded, and as can be seen from the plans and photographs, the new facilities now form an integral part of the buildings on this site.
It is accepted that for the purposes of VAT, the building works constituted a taxable supply to the respondent church, but in relation to the period after 1 June 1984, is that supply standard-rated or zero-rated? That was the issue which...
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