Swan Developments (Land Co) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 April 1992 |
| Date | 08 April 1992 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Briarach Ltd VAT(LON/90/609) No. 5703; [1991] BVC 605
Curtis Henderson Ltd VAT(LON/90/1432) No. 5815; [1991] BVC 646
Viva Gas Appliances Ltd; C & E Commrs v VAT(1983) 1 BVC 588
Wimpey Group Services Ltd v C & E Commrs VAT(1988) 3 BVC 340
Input tax - Land and construction - Whether input tax attributable to taxable or exempt supply - Whether a grant by a person constructing a building designed as a number of dwellings was of a major interest in it - Whether conversion, reconstruction, alteration or enlargement of an existing building - Whether an apportionment appropriate where an intention to make a taxable supply was frustrated and an exempt lease granted - Value Added Tax Act 1983 schedule 5 group 8Value Added Tax Act 1983, Sch. 5, Grp. 8, item 1 and Note (9); Value Added Tax Act 1983 schedule 6 group 1Sch. 6, Grp. 1, item 1.
The issue was whether the input tax incurred on work carried out on a block of flats, which was to have been sold but was in fact let, was recoverable as being attributable to the zero-rated supply of a grant of an interest in a building by a person constructing it or an exempt supply because the work was in fact the conversion of an existing building.
The appellant was a building and development company and appealed against a decision of the commissioners to disallow input tax incurred on construction work carried out on Astra House, a large building in Chadwell Heath, Essex. It had originally been built before the appellant purchased it in 1988 for conversion into 50 flats. The work was completed in 1990 but the intention of the appellant to sell the entire block failed to be realised in a deteriorating market. In the event, a tenancy agreement for three years was entered into with Newham Borough Council, although at the time of hearing there was a realistic prospect of disposing of the freehold.
The work carried out on the building which was constructed from reinforced frame concrete consisted of removing outside walls and replacing them. Work started from the roof and continued downwards floor by floor, the staircase was moved and approximately 40 per cent of the pillars supporting the floors were replaced as was a substantial part of the total floor area. The lift shaft of the original building was retained. A penthouse was built on top.
The appellant contended that it was entitled to recover input tax incurred in carrying out the work because the supply it intended to make, namely the sale of the freehold, was zero-rated as being the grant of a major interest by a person constructing a building, designed as a number of dwellings.
The commissioners contended that the goods and services supplied were used for the purpose of making an exempt supply, namely the granting of a tenancy to Newham Borough Council. Moreover, the work did not amount to the construction of a building but to the conversion, enlargement, reconstruction or alteration of Astra House so that the subsequent supply was not a taxably supply within the terms of Value Added Tax Act 1983 schedule 5 group 8Sch. 5, Grp. 8.
Held, dismissing the company's appeal:
1. The work carried out by the appellant was not the erection of the building as a whole any more than it was the demolition of the building as a whole. What was achieved was the conversion of one sort of building, namely an office block, into a different sort of building, namely a block of flats. The work amounted to a conversion and could be said to be alterations. It was also, with the penthouse, an enlargement.
2. If the tribunal were wrong, and...
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