Taylor Wimpey Plc v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Warren,Judge Berner |
| Neutral Citation | [2017] UKUT 0034 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,7 February 2017 |
| Date | 07 February 2017 |
| Published date | 21 February 2017 |
[2017] UKUT 0034 (TCC)
Appeal numbers: UT/2015/0094
UT/2015/0095
VAT – Builder’s Block restricting deduction of input tax for certain items on
a supply of a new dwelling – whether block, or further restrictions from
1984 and 1987, unlawful under EU law – meaning of “incorporates … in
any part of the building or its site” – meaning of “ordinarily installed by
builders as fixtures”
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
TAYLOR WIMPEY PLC Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
MR JUSTICE WARREN
JUDGE ROGER BERNER
Sitting in public at The Royal Courts of Justice, Rolls Building, Fetter Lane,
London EC4 on 8 – 11 November 2016
Jonathan Peacock QC and James Rivett, instructed by PricewaterhouseCoopers
LLP, for the Appellant
Andrew Macnab and Ewan West, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2017
DECISION
1. These are the appeals of Taylor Wimpey Plc (“Taylor Wimpey”) against two
decisions of the First-tier Tribunal (“the FTT”) (Judge Mosedale) which were released 5 respectively on 12 June 2014 (“the First FTT Decision”) and 12 February 2015 (“the
Second FTT Decision”).
2. The decisions concerned claims made by Taylor Wimpey, as representative
member of its VAT group, for recovery of input tax incurred by Taylor Wimpey or
members of the group during the period between 1 April 1973 and 30 April 1997 10 (“the Claim Period”). The claims related to the installation in new-built homes of (i)
built-in ovens, (ii) surface hobs, (iii) extractor hoods, (iv) washing machines, (v)
microwave ovens, (vi) dishwashers, (vii) washer driers, (viii) tumble driers, (ix)
refrigerators, (x) freezers, (xi) fridge freezers and (xii) carpets and carpeting materials
(“the Claim Items”). The claim is a Fleming claim, made on 30 March 2009, within 15 the extended transitional limitation period for historic claims provided for by s 121 of
the Finance Act 2008, following the decision of the House of Lords in Fleming
(trading as Bodycraft) v Revenue and Customs Commissioners; Condé Nast
Publications Ltd v Revenue and Customs Commissioners [2008] STC 324.
3. The amount of the claim is substantial. As things currently stand, the aggregate 20 amount of input tax claimed is £51,179,177.59.
The basis of Taylor Wimpey’s claim
4. Taylor Wimpey’s claim raises issues of domestic and EU law, as well as factual
issues. It concerns the effect, or effectiveness, of UK legislation, described as the
Builder’s Block, under which, in various legislative forms, input tax which would 25 otherwise be deductible in respect of expenditure on goods incorporated in a new
dwelling which is supplied by way of a zero-rated supply is rendered non-deductible.
5. The block, which was first introduced by the Input Tax (Exceptions) (No 1)
Order 1972, with effect from 1 April 1973, applies only to goods which are
incorporated into any part of the building or its site. It excludes (and so allows 30 recovery of input tax in these respects) certain items, namely materials, builders’
hardware, sanitary ware and other articles of a kind ordinarily installed by builders as
fixtures (or, since 1 March 1995, ordinarily incorporated by builders in the building or
site). But as a result of legislative changes, there have been introduced successive
exceptions to those exclusions, thus blocking input tax recovery on certain specific 35 classes of goods incorporated in the building, even where they are ordinarily installed
as fixtures, or ordinarily incorporated in the building or site.
6. Thus, from 1 June 1984, by virtue of Article 2 of the Value Added Tax (Special
Provisions) (Amendment) (No 2) Order 1984 (“the 1984 Order”), input tax was
specifically blocked in relation to (a) finished or prefabricated furniture, other than 40 furniture designed to be fitted in kitchens, (b) materials for the construction of fitted
furniture, other than kitchen furniture, and (c) domestic electrical or gas appliances,
3
other than those designed to provide space heating or water heating or both. From 21
May 1987, by the Value Added Tax (Construction of Buildings) Order 1987 and its
replacement, the identical Value Added Tax (Construction of Buildings) (No 2) Order
(taken together “the 1987 Order”), a further specific block was introduced, this time
for carpets or carpeting materials. 5
7. The legislation changed again with effect from 1 March 1995. The Builder’s
Block continued to apply to goods incorporated in any part of a building as described
in the zero-rating schedule (Schedule 8 to the Value Added Tax Act 1994 (“VATA”)),
including a dwelling or its site, but not to building materials. The expression
“building materials” was itself to be found in Schedule 8, and meant goods of a 10 description ordinarily incorporated in a building (which included installation as
fittings), other than goods of the specific descriptions already excluded (and thus
blocked), with the exception of electrical and gas appliances designed to heat space or
water (as before) and new exceptions (thereby affording input tax recovery) for such
appliances to provide ventilation, air cooling, air purification or dust extraction and 15 door entry systems, waste disposal units and machines for compacting waste, if
intended for use in a building designed as a number of dwellings, burglar alarms, fire
alarms, fire safety equipment and other appliances designed solely for the purpose of
enabling aid to be summoned in an emergency.
8. We have set out in a schedule to this decision the text of the legislation on the 20 Builder’s Block as it applied from time to time in the Claim Period.
9. The arguments of Taylor Wimpey before the FTT, and which were essentially
repeated and augmented in this appeal, were first that the Claim Items were not
“incorporated” into the new-build homes, construing “incorporated” by reference to
the English land law meaning of “fixtures”, and secondly (and if wrong on the first 25 argument) that the Claim Items were fixtures of a kind ordinarily installed by builders,
and to the extent such items were nonetheless blocked from input tax recovery by way
of specific exclusion from such recovery, the block was unlawful under EU law.
The FTT’s decisions
10. The parties helpfully subdivided the Claim Items into three categories, as 30 referred to by the FTT at [5] of the First FTT Decision. The first was low
specification appliances, namely ovens, surface hobs and extractor hoods. The
second, high specification appliances, covered all the other items, with the exception
of the final category, carpets and carpeting materials.
11. In the First FTT Decision, addressing the domestic law issues, the FTT found 35 first that all of the goods were incorporated in the building. It rejected Taylor
Wimpey’s submission that only something affixed to a building as a fixture could be
incorporated in it. The FTT applied a literal reading of the legislation and a purposive
approach to its construction. It concluded, at [298], that so far as goods were
concerned, “incorporates” in the context of the legislation in relation to the Builder’s 40 Block meant incorporated such that the goods were part of the single zero-rated
supply of the dwelling house. The FTT went on to find, at [302], that all the Claim
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