Commissioners for Customs and Excise v Zielinski Baker and Partners Ltd

JurisdictionEngland & Wales
Judgment Date26 February 2004
Neutral Citation[2004] UKHL 7
Date26 February 2004
CourtHouse of Lords
Her Majesty's Commissioners of Customs and Excise
Zielinski Baker & Partners Limited

[2004] UKHL 7

The Appellate Committee comprised:

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Hope of Craighead

Lord Walker of Gestingthorpe

Lord Brown of Eaton-under-Heywood



My Lords,


I have the misfortune to have reached a different conclusion from your Lordships. So I will set out my own views as shortly as possible. I agree that if the relevant statutory provisions are read literally the commissioners' case is unanswerable. Among the supplies zero-rated by the Value Added Tax Act 1994 as amended is the supply of services in the course of an approved alteration of a protected building. A 'protected building' means (a) 'a building' which (b) is 'designed to remain as or become a dwelling or number of dwellings' and which, additionally, (c) is 'a listed building' within the meaning of the Planning (Listed Buildings and Conservation Areas) Act 1990: see item 2 and note (1) in Group 6 in Schedule 8 to the 1994 Act. To satisfy condition (b), as I have labelled it, each dwelling must consist of 'self-contained living accommodation' and meet the other conditions set out in note (2).


Section 1 of the Planning (Listed Buildings and Conservation Areas) Act 1990 provides that a listed building is a building included in a list compiled or maintained by the Secretary of State and that 'any object or structure within the curtilage of the building which, although not fixed to the building, forms part of the land and has done so since before 1st July 1948, shall be treated as part of the building'.


In the present case the approved alterations comprised alterations, not to the main house, which is a listed building, but to an adjacent outbuilding within the curtilage of the main building. The outbuilding is 5 yards away from the main building. The two buildings are not linked structurally, although they are linked by a substantial stone wall. Thus, and this is accepted on all sides, although the outbuilding is a separate building, for listed building purposes it is to be treated as part of the listed building.


The works in dispute comprised conversion of the outbuilding into games and changing facilities and the construction of an adjoining indoor swimming pool. Thus the alterations satisfied condition (c), as I have labelled it. But if the statutory provisions in the 1994 Act are read literally, the alterations did not satisfy condition (b). The outbuilding was not designed to become a dwelling.


The difficulty I have with this interpretation of the legislation is that it produces startling results which make no sense. If the games room and the indoor swimming pool were installed on the ground floor of the main house the works would be zero-rated. But, so it is said, there is a world of difference if the games room and the indoor swimming pool are installed in a separate existing building a few feet away. It makes a world of difference even though for listed building purposes the outbuilding is treated as part of the main house.


The matter does not rest there. Perhaps even more oddly, if additional bedroom or living accommodation were added to the main building that work would be zero-rated. But not so, according to the commissioners' argument, if an adjacent barn existing before 1st July 1948 were converted in the same way. Even if the enlarged living accommodation were self-contained by being used exclusively as one unit of living accommodation with the main house, that would not be zero-rated. It would be outside the zero-rating exception because the accommodation would be split between two buildings.


No one has been able to suggest a reason why these differences should matter. The social purpose of Group 6 in Schedule 8 to the 1994 Act was to alleviate the financial burden on the owners of listed buildings. This alleviation is confined to alterations, which in practice means improvements, as distinct from repairs or maintenance. The introduction of condition (b), as I have labelled it, added the 'separate dwelling' requirement in 1989. But no one has been able to put forward any suggestion why it should matter if the alterations carried out to improve the dwelling house amenities are made to an existing outbuilding as distinct from the main building itself.


I decline to attribute to Parliament such a strange intention as is involved in the commissioners' case. A meaningful, purposeful interpretation is to be preferred. I agree with the approach of the Birmingham Value Added Tax tribunal. The key lies in recognising that the reference to 'a building' in the singular in the definition of protected building in note 1 ('"protected building" means a building..') includes the plural 'buildings' where appropriate. If the accommodation comprises self-contained living accommodation it matters not that, structurally, part of it is located in one building and part in another, so long as both buildings fall within the statutory definition of a listed building. I would dismiss this appeal.


My Lords,


I gratefully adopt the recital of the facts of this case in the speech to be delivered by my noble and learned friend Lord Walker of Gestingthorpe. It raises a point of statutory construction on which I must confess that I cannot feel the slightest doubt. To qualify for zero rating under Group 6, item 2 of Schedule 8 to the Value Added Tax Act 1994, the outbuilding to which alterations were made must have been a "protected building". Leaving aside immaterial matter, note (1) defines a protected building by reference to two propositions, both of which must be true. First, it must be "a building which is designed to remain as or become a dwelling house." Secondly, it must be a "listed building, within the meaning of the Planning (Listed Buildings and Conservation Areas) Act 1990". These two requirements are cumulative, being separated by the word "and".


The actual outbuilding to which the alterations in this case were made was not designed to remain as or become a dwelling house. It was designed to be a games room, changing room and swimming pool. It therefore did not satisfy the first part of the definition. "Listed building", on the other hand, is a statutory concept, a notional building which by virtue of section 1(5) of the 1990 Act is deemed to include structures within the curtilage of the building described in the list. So the outbuilding may well have counted as a listed building, although it would probably be more accurate to describe it as part of a notional listed building. Whether that is good enough to satisfy the second part of the definition does not arise. The claim to zero rating fails at the first hurdle.


The majority of the Court of Appeal treated the first part as satisfied by deeming the outhouse and the principal house (which was a dwelling house) to be a single building to which the alterations had been made. The only justification given for this heroic piece of deeming was an analogy with the definition of a "listed building" in the 1990 Act. The importation of this concept into the first part of the definition was described by the majority as "suffusive" or "holistic". It seems rather to have involved some process of osmosis by which the artificial definition of a "listed building" in the 1990 Act, to which reference was made in the second part of the definition, passed through the membrane of the word "and" and infected the meaning of the ordinary word "building" in the first part. In my opinion there is no ground for attributing such an intention to Parliament. The meaning of the first part of the definition is perfectly clear and I see no reason not to give "building" the ordinary meaning of the actual building to which the alterations are made.


A good deal of the argument was spent in examining other provisions of the 1994 Act, other statutes and other hypothetical facts to discover clues which might support or undermine the opposing constructions. But in my opinion the language is too clear to admit contradiction or need support from such tenuous inferences. The reasons why Parliament may have wished to narrow the scope of zero rating to buildings actually used as dwelling houses are convincingly explained by Etherton J in a judgment to which I would pay tribute for its clarity and comprehensiveness.


I would allow the appeal and restore the judge's order.


My Lords,


I have had the advantage of reading in draft the speech of my noble and learned friend Lord Walker of Gestingthorpe. I agree with it, and for the reasons which he has given I too would allow the appeal. But, as we are not unanimous and as we are differing from the majority in the Court of Appeal, I wish to add these brief observations.


The issue in this case is one of statutory construction. At the centre of the dispute is the question how the expression "protected building" as defined for the purposes of Group 6 in Schedule 8 to the Value Added Tax Act 1994 in note (1) to the Group is to be applied in a case where works of reconstruction or alteration are being carried out to a building ("the outbuilding") which lies within the curtilage of a listed building ("the house") but has not itself been listed in its own right. The effect of the definition of the expression "listed building" in section 1(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990 is that the outbuilding must be treated as part of the house for the purposes of that Act. So it is subject to the controls set out in Chapter II of Part I of that Act, which prohibit the carrying out of any works of alteration which may affect its character as a...

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