Opal Carleton Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 29 July 2010 |
| Neutral Citation | [2010] UKFTT 353 (TC) |
| Date | 29 July 2010 |
| Court | First Tier Tribunal (Tax Chamber) |
[2011] TC 00635
[2010] UKFTT 353 (TC)
David S Porter (Judge) (Chairman); Roger Freeston (Member)
Michael Conlon QC instructed by Mazars LLP Chartered Accountants for the Appellant
James Puzey Counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents
Reduced rate - Refurbishment of student accommodation - Whether "residential accommodation for students" liable to VAT at standard rate or "changed number of dwelling conversion" liable to VAT at reduced rate - The appellant was a developer in receipt of services provided by a building contractor - It appealed against a decision of the commissioners that refurbishment work carried out at the University of North London halls of residence was standard-rated for VAT purposes - The university had granted the appellant a lease of the development site for a term of 99 years in consideration for a premium of £37.5m - The appellant appointed a contractor to carry out the building work at a price of £26.2m plus VAT - Following completion, the property was used as residential accommodation for students during term time with occasional short lets to others outside term time - The commissioners ruled that the work was part of an overall scheme to provide student accommodation and that it did not qualify for the reduced rate of VAT - The appellant argued that the accommodation related to dwellings and that the work was eligible for the reduced rate as a changed number of dwellings conversion under the Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 7A group 6Sch. 7A, Grp. 6, item 1 and Note 3 - The appellant submitted that the work produced a different number of units of accommodation and sought to restrict the appeal to the consideration of physical characteristics, contrasting the redeveloped building with what existed before - The commissioners contended that this approach disregarded the use of the property and the use for which planning permission was granted - Their position was that the property was used for a relevant residential purpose and that it was impossible to alter this designation simply by changing the number of rooms and upgrading the facilities without a permitted change of use - In the commissioners' view, if the result of the refurbishment was accommodation used for the same purpose, this did not mean it had been converted into "dwellings" for the purposes of attracting the reduced rate of VAT - The appellant argued that the building works were within Note 2(1)(a) of Grp. 6 as a "changed number of dwellings conversion" - Held, that the reduced VAT rate was an exception to the general rule and that the legislation must be interpreted strictly - Accordingly, it was not appropriate only to consider the physical attributes of the building works - Although many of the units might fall within the definition of "dwelling", this did not mean that the relief would automatically apply - It was necessary to look at the substance of the transaction - The development was of halls of residence for students which had been originally constructed for that purpose - The work was carried out to upgrade the students' units, which were for a relevant residential purpose and not dwellings - The units in the refurbished buildings fell within Note 6(d) to Grp. 6 as residential accommodation for students or school pupils and were, therefore, used for a relevant residential purpose - Thus, the work was excluded from the reduced rate of VAT and was liable to VAT at the standard rate - Appeal dismissed.
1. The Appellant (Opal) appeals against the decision of the Respondents (HMRC) in a letter dated 2 October 2009 disallowing VAT at the reduced rate of 5% in relation to refurbishment works carried out by H G Construction Limited on behalf of Opal at Tufnell Park Halls of Residence, Huddleston Road, London N7. The Appellant says that the accommodation relates to dwellings and is therefore entitled to the reduced rate as a "changed number of dwellings conversion". (See Item 1, Value Added Tax Act 1994 schedule 7A group 6Group 6, Schedule 7A VATA 1994). HMRC say that the refurbishment works were part of an overall scheme to provide student accommodation for the University of North London and as such the refurbishment fell to be standard rated as use as a "relevant residential purpose" namely "residential accommodation for students" (see Value Added Tax Act 1994 schedule 7A subsec-or-para 6 group 6paragraph 6, Group 6, Schedule 7A VATA 1994). Vat at 17.5% amounted to £937,160.75 and at 5% to 267,760.21. Opal have paid the VAT at 17.5%. Although Opal are the customer for whom H G Construction Limited carried out the refurbishment works and by whom VAT has been raised, the parties have agreed that Opal have a sufficient interest in the matter to bring this appeal.
2. Mr James Puzey of counsel appeared on behalf of HMRC, and Mr Michael Conlon QC appeared on behalf of Opal and Mr Andrew Charles Pape provided a witness statement and gave evidence under oath as to the refurbishment works. Three jointly agreed bundles were provided for the Tribunal and both Mr Puzey and Mr Conlon produced skeleton arguments. We were referred to the following cases:
•Williams & Glyn's Bank Ltd (1974) VATTR 262; (1974) 1 BVC 1021
•EC Commission v United KingdomECAS (Case 416/85) (1988) 3 BVC 378
•Smith v CCE (1997) VTD 5579
•University of Bath No. 14,235; [1996] BVC 2909
•University Court of the University of St Andrews No. 15,243; [1998] BVC 4033
•C & E Commrs v Marchday Holdings LtdVAT[1997] BVC 165
•Thompson No. 15,834; [1999] BVC 4037
•Sherwin & Anor No. 16,396; [2000] BVC 2195
•Moore v Secretary of State for the Environment (1999) 77 P&CR 114
•Look Ahead Housing Association No. 16,816; [2001] BVC 2107
•Uratemp Limited v Collins [2002] ALL.E.R .46
•Amicus Group Ltd No. 17,693; [2003] BVC 4005
•Oldrings Development Kingsclere Ltd No. 17,769; [2003] BVC 4025
•Agudas Israel Housing Association Ltd No. 18,798; [2005] BVC 4029
•Sharples & Anor No. 20,775; [2009] BVC 4016
3. The parties produced a statement of agreed facts. The Disputed Decision is whether the Building Works are correctly standard rated. Opal contends that they are liable to VAT at 5%, by virtue of Value Added Tax Act 1994 section 29A subsec-or-para 1section 29A(1)(a) of VATA 1994 read with Item 1, Group 6, Schedule 7A thereof. Opal has carried on business as a property developer at The Place, Ducie Street, Manchester, M1 2TP. H G Construction Limited is registered for VAT under VAT registration number 750 7260 42. On 1 August 2002 the University of North London merged with London Guildhall University to become London Metropolitan University (the University) which took over the rights of University of North London and London Guildhall University. The University is and was the freehold owner of Tufnell Park Halls of Residence (the Development Site). Prior to the building works carried out by H G Construction Limited, the Development Site comprised a six-storey building, which included a total of 227 individual bedrooms and communal kitchen, dining and bathroom facilities. Those were utilised by University of North London and subsequently the University as residential accommodation for its students.
4. On 29 May 2001 University of North London applied for planning permission inter alia to demolish some existing buildings on the Development Site and construct additional student residential accommodation. The Application was refused by the local planning authority on 24 July 2001. Following an appeal by the University under section 78 of the Town and Country Planning Act 1990, the Inspector granted planning permission on 8 November 2002 for the construction of a new building (Ref.PO11088). This planning permission only relates to the new construction works and is not the development that is the subject of this appeal. A further application for planning permission, specifically in relation to the Building Works, was made by the Appellant and granted by the planning authority on 30 August 2008.
5. On 27 July 2007 the University granted the Appellant a lease of the whole Development Site for a term of 99 years commencing on that date at a peppercorn rent, but for a premium of £37,500,000. By a contract, dated January 2008, between H G Construction Limited and the Opal, H G Construction Limited agreed to carry out the Building Works at the Development Site at the price of £26,244,924.93 together with VAT thereon, if applicable. The Building Works were carried out between January 2008 and August 2009. Following completion of the building works the building has been used as residential accommodation for students during term time with occasional short lettings for others out of term time.
6. The Lease to Opal covers the entire site both the rebuild and refurbishment. The Authorised Use in the lease is:
as student residential accommodation together with ancillary use or such other use as the Landlord may consent to, such consent not to be unreasonably withheld or delayed. (our emphasis)
Clause 8 provides:
For the initial ten years of the term, the Tenant to use the Property only for the Authorised Use. Thereafter subject to the provision of clause 8 and any other relevant term of this lease the Tenant is free to use the Property as it desires.
Clause 10 provides:
Legislation and planning.
10.1 The Tenant is to comply with all statutes, other legislation and any notice, order, proposal, requisitions, direction or other communication from any public authority in respect of the Property, their use and occupation or the carrying out of any works to the Property and to indemnify the Landlord against any breach of this obligation
The first planning permission, in relation to the demolition of existing buildings and the construction of additional student residential accommodation, was allowed on appeal and was zero rated for VAT purposes. In...
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Cordery Build Ltd
...occupied his bedsit pursuant to a separate assured tenancy agreement did not prevent the Note applying; he cited Opal Carleton Ltd [2010] UKFTT 353 (TC); [2011] TC 00635, where it was not argued that the fact that residents in a student hall of residence occupied their rooms on assured shor......