Smith
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 November 2012 |
| Neutral Citation | [2012] UKFTT 713 (TC) |
| Date | 22 November 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 713 (TC)
Judge Michael Tildesley OBE
Appellant appeared in person
Kim Tilling appeared for HMRC
VAT - do it yourself builders scheme - residential conversion - whether the existing building was non-residential - no - garage and extension to existing dwelling - appeal dismissed - VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1s. 35(1)
The First-tier Tribunal decided that a building purchased by a taxpayer was a residential building under the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 8 since a significant part of it was a double garage in occupation with a dwelling-house. The Tribunal also decided that the taxpayer's works on the building did not constitute a residential conversion under VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1A section 35 subsec-or-para 1Ds. 35(1A)(c) and 35(1D). VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 7(a)(i) was not met because the room over and the workshop/garden shed adjoining the garage were designed for use as a dwelling. VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 7(b) was also not met because the commencement of the conversion works took place within ten years from the construction of the original building. Thus, the taxpayer was not entitled to a VAT refund under the do-it-yourself ("DIY") builders scheme.
The taxpayer appealed against HMRC's decisions refusing her claim for a VAT refund under VATA 1994, Value Added Tax Act 1994 section 35s. 35.
In 1870, a school was built at 25 Main Street. In 1970, a couple purchased the school and converted it into a dwelling-house. In 2000, the couple purchased an additional piece of land which adjoined the southern boundary of the property, wherein they erected the garage. In 2001, a room over the garage and a workshop/garden shed were built adjoining the double garage at the ground floor. In 2005, the taxpayer purchased the property.
In 2009, the taxpayer claimed for a VAT refund under the DIY builders scheme in respect of the property. The taxpayer stated in her application that she had converted a non-residential building, a garage which had been empty for more than ten years, into a two-storey detached house with four bedrooms, two reception rooms, two bathrooms/en-suites, a kitchen and utility room.
The taxpayer contended that she never used the garage for the purpose of keeping motor vehicles. The property never looked like a garage and that two-thirds of the structure could not be used as a garage. The room over and the workshop/garden shed could not be treated as residential because they were parts of a separate building constructed later than the property.
HMRC contended that the whole property should be regarded as a garage, and therefore, residential. If that proposition failed and only part of the building was a garage, HMRC argued that the remaining parts, the workshop/garden shed and the room over, were residential because of their specific links to the dwelling.
Whether the taxpayer's building works constituted a residential conversion under VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1A section 35 subsec-or-para 1Ds. 35(1A)(c) and 35(1D).
Held, dismissing the taxpayer's appeal:
The Tribunal held that the construction and design of a building as a garage was a relevant consideration. If it could be determined on objective criteria that it was so constructed and designed, the evidence to displace the conclusion that it was a garage must be strong. Furthermore, a building which had been designed and constructed as a garage did not cease to be a garage simply because the taxpayer chose not to store her vehicles in it (Grange Builders (Quainton) LtdVAT[2005] BVC 4054, considered).
Here, a significant part of the original building was designed and built as a double garage. The taxpayer's evidence that the building was never used as a garage was not strong enough. The double garage was, in all probability, used for the storage of vehicles. Thus, the original building converted by the taxpayer was a residential building under VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 8.
The Tribunal was satisfied that the room over the garage and the garden shed were an extension of the residential provision of the property. They were designed to enhance the domestic facilities for the property. The fact that they were incorporated in a separate building did not upset the conclusion that they were part of the property. The taxpayer adduced no persuasive evidence that the room over the garage and the garden shed had been used for non-residential purposes. VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 7(a)(i) was not met because the room over the garage and the garden shed were designed for use as a dwelling, in that they were integral parts of the residential provision at 25 Main Street. Equally, VATA 1994, Value Added Tax Act 1994 schedule 8 group 5Sch. 8, Grp. 5, Note 7(b) was not met because the commencement of the conversion works took place within ten years from the construction of the original building comprising the double garage, the room over and the garden shed.
Therefore, the taxpayer was not entitled to a refund on the VAT charged on the building works because they did not constitute a residential conversion under VATA 1994, Value Added Tax Act 1994 section 35 subsec-or-para 1A section 35 subsec-or-para 1Ds. 35(1A)(c) and 35(1D).
1.The Appellant appealed against HMRC's decisions dated 6 November 2009, 22 October 2010 and 16 November 2010 refusing a claim for a VAT refund in the sum of £6,948.60 under the DIY Builders and Converters Refund Scheme in accordance with Value Added Tax Act 1994 section 35section 35 of the VAT Act 1994.
2.The claim related to the conversion and extension of an existing building into a dwelling. There were three issues in dispute:
(2) Eligibility: whether the existing building was a non-residential building, and more particularly a garage occupied together with a dwelling?
(3) Quantum: if the Tribunal finds that the claim was eligible, HMRC disputed part of the refund relating to three specific invoices.
(4) Otherwise than in the course of business: whether the converted property was rented prior to the claim being made and was intended to be rented during the period of the works being carried out.
3.The Tribunal decides not to deal with dispute (3) regarding otherwise in the course of business. HMRC raised this matter at a late stage in the proceedings, and stemmed from a telephone conversation between the Appellant and Ms Tilling of HMRC on 14 May 2012. The contents of that telephone conversation were hotly contested. The Tribunal considers that as this issue did not form part of the decision letters and the grounds of Appeal it would not be correct to hear it. The Tribunal, therefore, proceeds on the basis that the works were carried out otherwise than in the course of business but makes no formal determination on the issue. It is a matter for HMRC whether it wishes to raise this matter at some future date which would constitute a fresh decision giving rise to a right of Appeal to the Tribunal.
4.On 17 May 2012 the Tribunal heard evidence from the Appellant in person and the parties' submissions. The Tribunal also received in evidence a bundle of documents. The hearing was adjourned part heard to enable the Appellant to use her best endeavours to obtain a copy of the planning permission for the construction of a proposed garage1 with attic room and the site plan drawing undertaken by the former owners of the property, Mr and Mrs H2. The parties were also given the right to make further submissions on the documents, if produced.
5.The Appellant was unable to obtain a copy of the planning permission for the construction of a proposed garage with attic room and the site plan drawing undertaken by Mr and Mrs H in accordance with the directions issued on 17 May 2012. The Appellant contended that she had used her best endeavours and that the Tribunal should proceed to its decision without those documents. HMRC in response to the Appellant's difficulties had been in contact direct with the Planning Authority and had received a copy of the planning application and associated documents. HMRC was in the process of obtaining a copy of the planning permission subject to approval of expenditure for the £15 fee. Given these circumstances HMRC applied for a variation of the directions issued on 17 May 2012.
6.On 16 July 2012 the Tribunal varied the directions issued on 17 May 2012. The Tribunal was of the view that the documentation from the Planning Authority was relevant to the dispute and that HMRC should be given the opportunity to obtain a copy of the planning permission. The Tribunal directed that by no later than 4pm on 31 August 2012 HMRC make written submissions on the planning documentation. The Appellant was given the right of response which if exercised would be by no later than 4pm on 14 September 2012. The parties complied with the directions. The Tribunal indicated that it would publish its decision by no later than 2 November 20123.
7.On 4 November 2009 the Appellant submitted a claim for a VAT refund in the sum of £6,948.60 under the DIY Builders' Scheme in respect of a property at 25A Main Street. The Appellant stated in her application that she had converted a non-residential building, a garage, which had been empty for more than 10 years into a two storey detached house with four bedrooms, two reception rooms, two bathrooms/en-suites, a kitchen and utility room. The Appellant gave the 19 August 2009 as the certified date of completion of the converted dwelling. The Appellant in her letter accompanying the application reiterated that
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...change of a non residential building to a dwelling.CasesCottamVAT[2007] BVC 4072PodolskyTAX[2010] TC 00322ClarkTAX[2010] TC 00552SmithTAX[2012] TC 02380The law [4]A do-it-yourself house builder who is not engaged in the building business cannot, unlike his business counterpart who is making......