Tilley and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 August 1997 |
| Date | 20 August 1997 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
(LON/96/1199) No. 15,097.
The following cases were referred to in the decision:
C & E Commrs v London Diocesan Fund VAT[1993] BVC 123
Evans VAT(MAN/88/587) No. 4415; (1989) 4 BVC 1443
Mann VAT(LON/95/2066) No. 14,004; [1996] BVC 4273
Wimpey Group Services Ltd v C & E Commrs VAT(1988) 3 BVC 340
DIY builder - Conversion of non-residential building - Recovery of VAT paid - Whether the original building or part thereof was residential - Value Added Tax Act 1994 section 35 schedule 8 group 5Value Added Tax Act 1994, s. 35 and Sch. 8, Grp. 5, Notes (2) and (7).
The issue was whether the appellants were entitled to a VAT refund on the conversion of a building owned by them.
The appellants purchased a building in St Leonards-on-Sea which had been a public house until the mid to late 1970s when it was turned into a photo gallery with an Arts Council grant. The external parts of the building were in good condition, but it had not been occupied for some considerable time and was not connected to either water or gas. The building was on two floors. There was a bathroom on the upstairs floor, but there were no cooking facilities. Downstairs there was an old-fashioned sink which appeared to be part of the kitchen and washing-up facility for the original public house. The appellants relied on a letter from the planning authority which confirmed that when the planning application made by them was implemented there was a material change in use of the property in terms of the planning legislation from a photo gallery to a single family dwelling. On those facts, the appellants contended they were entitled to a refund of £7,989, being VAT paid by them in respect of the conversion.
The commissioners argued that the building was not a non-residential building prior to the work being undertaken because, on the evidence available, although not conclusive as to the greater part of it, led to the likelihood that the building was adapted for use as a dwelling and that it had been used as a dwelling for at least some time since April 1973. The burden of proof that the works for the dwelling came within the conditions for entitlement to relief from VAT was on the appellants.
Held, dismissing the taxpayers' appeal:
1. The building was originally designed for use, as to the first floor, as a dwelling and it was so used both before and after 1 April 1973.
2. The change of use to a gallery did not affect this and the appellants' contention that it would be unfair to expect them to go into the history of the building so as to establish its original status or use was incorrect.
3. They were not entitled to a VAT refund as claimed.
[The tribunal set out the facts summarised above and continued as follows.]
On these facts the appellants say they are entitled under Value Added Tax Act 1994 section 35s. 35 of the Value Added Tax Act 1994 for £7,989.11 VAT to be repaid to them in respect of their conversion of a building in their ownership into a dwelling house for their private occupation. The appellants say that the building was a commercial building which did not contain a residential part at the time they acquired it, and was unsuitable and unfit for habitation. The building was not designed or adapted to be a dwelling as a whole or in part, and that the reality of the matter was that, with appropriate planning consent, they carried out works of conversion which created a proper dwelling where none had existed before. The past history of the building, including its use as a public house was largely irrelevant. The fact that a previous occupier of the building was included in the electoral list or paid council tax was not conclusive evidence as to the design or adaptation of the building, only of the reply given by that person to the questionnaire delivered at that address. The council tax banding was only an indication of the information given to the valuation authority, there being no evidence that the valuation was based on any inspection. The existence of a bathroom on the first floor was not conclusive as to the design or adaptation of the building. It did not indicate residential use. It might have been there for a number of other reasons. While any amount of conjecture was possible, the fact was that as far as could be ascertained the first floor of the building did not at any time provide self-contained living accommodation.
The appellants therefore submitted that the works which they had carried out were "a residential conversion" in accordance with the terms ofValue Added Tax Act 1994 section 35 subsec-or-para (1A)s. 35(1A)(c) of the Value Added Tax Act 1994. All the conditions of Value Added Tax Act 1994 section 35 subsec-or-para (1C)s. 35(1C) were fulfilled, and the works complied with the conditions of Value Added Tax Act 1994 section 35 subsec-or-para (1D)s. 35(1D) as they constituted "a residential conversion" to the extent that they consist in the conversion of a non-residential building, or a non-residential part of a building into:
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(a) a building designed as a dwelling … ;
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(b) a building intended for use solely for a relevant residential purpose; or
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(c) anything which would fall within paragraph (a) or (b) above if different parts of a building were treated as separate buildings.
The appellants say that the building is and was indivisible.
The appellants say that the notes to Value Added Tax Act 1994 schedule 8 group 5Grp. 5 of Sch. 8 [to the Value Added Tax Act 1994] applying, in accordance with the terms ofValue Added Tax Act 1994 section 35 subsec-or-para (4)s. 35(4), support their case.
The appellants further rely on the judgment in Wimpey Group Services Ltd v C & E Commrs VAT(1988) 3 BVC 340 for the conclusion that the tribunal was concerned with the buildings not the use to which the buildings were put. Any residential use of the building in question did not detract from the fact that there was no...
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