Drummond
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 December 2012 |
| Neutral Citation | [2013] UKFTT 36 (TC) |
| Date | 19 December 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 036 (TC)
Judge Barbara J King, Warren Snowdon
Mr Andrew Stephenson, a friend, appeared for the Appellant
Mr John Nicholson, of HM Revenue and Customs, appeared for the Respondents
VAT - DIY builders scheme - did the planning permission prohibit the separate use of the property - yes - appeal dismissed
The First-tier Tribunal decided that a taxpayer's application for a VAT refund on the building of a house did not satisfy the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, note 2(c) since the relevant planning permission contained a condition which took it outside of the do-it-yourself (DIY) builders scheme for VAT. The wording of the condition might not actually use the word "use" but the restriction on occupancy, which linked occupancy to an adjacent business, effectively imposed a prohibition on separate use.
The taxpayer appealed against HMRC's refusal to pay the VAT which he incurred in building his new house. He believed that the construction of the dwelling was zero-rated under the do-it-yourself builders scheme for VAT.
The taxpayer was a director of a company ("EPL") which owned a park containing static retirement homes near the coast, north of Hartlepool. In 2001, the taxpayer bought that site and redeveloped it into a retirement park. He and his family moved into a bungalow within the park.
In 2006, the taxpayer bought a paddock adjacent and to the north west of the park. In 2008, he applied for permission to build a new house in the paddock. The planning permission was granted subject to "condition number five". It required that the occupation of the dwelling should be limited to a person solely or mainly employed or last employed prior to retirement at the adjacent caravan park, or a spouse and/or dependent of such person residing with him or her, or a widow or widower of such a person.
The taxpayer submitted that the planning condition in WendelsTAX[2011] TC 00737 contained very similar wording as that of the planning condition in this appeal. In that case, the Tribunal allowed the appeal, holding that the condition amounted to a restriction on occupancy but not a prohibition on separate use.
HMRC agreed that a separate disposal was not prohibited by the planning condition in this case. However, the separate use was prohibited by condition number five of the permission. Thus, the dwelling did not satisfy VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, note 2(c).
Whether the taxpayer's application for a VAT refund satisfied VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, note 2(c).
Held, dismissing the taxpayer's appeal:
The Tribunal agreed with the comment in Holden & AnorTAX[2012] TC 02043 that occupation and use of accommodation amounted to the same thing. The planning condition used the words "shall be limited to". The wording in this case might not actually use the word "use" but the restriction on occupancy, which linked occupancy to an adjacent business, effectively imposed a prohibition on separate use. The condition in this case imposed more than just a restriction on the class of worker who could occupy the house. Thus, the application for a VAT refund did not satisfy VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 2(c).
1.This is an appeal against the refusal of HMRC to pay Mr Drummond the VAT, amounting to £14,240.79, which he incurred when building his new house, now known as The Paddock. Mr Drummond made the claim believing that he came within what is known as the "do it yourself" builders scheme for VAT, which allows for certain work in the construction of a dwelling to be zero rated. HMRC have refused the claim on the ground that the house is subject to a planning condition which they say takes it outside of the scheme.
2.Mr Drummond is a director of Evergreen Park Limited which owns Evergreen Park, a site containing static retirement homes near the coast, north of Hartlepool. Mr Drummond bought this site, in about 2001 and redeveloped it into a retirement park. It has been referred to as a caravan park in the past but Mr Drummond now refers to the site as a retirement park. The homes on the site are larger than many static caravans, there is an age condition for those occupying homes on the site and under a special licence residents are permitted to occupy the homes throughout the year ie it is not just for holiday homes.
3.Mr Drummond and his family moved into a bungalow within Evergreen Park and in 2004 he made an application for the bungalow to be rebuilt in the same place within the boundary of Evergreen Park. Planning permission was granted for this under reference 04/177.
4.In 2006 Mr Drummond bought a paddock adjacent and to the north west of Evergreen Park and in 2008 an application was made to the planning authority for permission to build a new house in the paddock, instead of the house for which planning permission had been given in 2004. Outline planning permission under reference 2008/0554 was granted by Easington District Council and full planning permission was then given under reference PL/5/2009/0062. The permission was subject to a "condition number 5" as follows:-
The occupation of the dwelling hereby approved shall be limited to a person solely or mainly employed or last employed prior to retirement, at the adjacent caravan park currently known as Evergreen Park, Coast Road, Crimdon, or a spouse and/or dependent of such person residing with him or her, or a widow or widower of such a person
Reason: The creation of a separate residential unit in this location would be contrary to PPS7. New housing should only be allowed where it is essential in the interests of a site manager or other essential worker, unless exceptional circumstances prevail.
5.Value Added Tax Act 1994 section 35 subsec-or-para 1 section 35 subsec-or-para 1ASection 35(1) and (1A) of the VAT Act 1994 provides as follows:
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(1)Where-
(a) a person carries out works to which this section applies,
(b) his...
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Drummond v Revenue and Customs Comrs
...and without reasons. Mr Drummond was, however, invited to resubmit his application for protection from costs. SummaryIn Drummond TAX[2013] TC 02456, the First-tier Tribunal (FTT) ruled that Mr Drummond was not entitled to a refund of VAT incurred under the do-it-yourself (DIY) builders sche......
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Drummond v Revenue and Customs Commissioners
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