Whiteley
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 October 1993 |
| Date | 15 October 1993 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Batey v Wakefield TAX(1981) 55 TC 550
Bruce ENRVAT(BEL/90/3) No. 6326; [1991] BVC 798
McElroy VAT(1977) 1 BVC 1066
Samco Construction Ltd VAT(LON/88/1478) No. 4135; (1989) 4 BVC 1406
Symonds VAT(LON/90/1836) No. 9050; [1993] BVC 1354
Supply - Zero-rating - Construction of dwellings - Annexe and swimming pool constructed after completion of dwelling - Whether supply in course of construction of building designed as dwelling - Whether annexe entitled to zero-rating as building in its own right - Whether extension or annexation to existing building - Whether annexe garage constructed at same time as dwelling house - Planning consent - Value Added Tax Act 1983, Sch. 5, Grp. 8, items 2 and 3, Notes (2) and (9).
The issue was whether an annexe and an indoor swimming pool built after the dwelling house had been constructed and occupied were entitled to zero-rating, on the basis that the work was carried out in the course of the construction of a building.
In December 1988 the appellant and his wife purchased a property in Ascot, Berkshire. The house had been constructed in 1954 and there was a separate detached garage block well away from the house. Shortly after the purchase of the property the appellant instructed an architect to draw up plans for its redevelopment. His intention was to modernise the dwelling house, to demolish the existing garage and to construct an annexe on the site consisting of a triple garage with office space and residential accommodation for domestic staff and to build an indoor swimming pool which would connect to the rear of the dwelling house.
He was advised by a planning consultant that his proposals should be presented to the local planning authority "incrementally", to give a greater chance of acceptance. The application for planning consent for works to the house was submitted in February 1989 and granted in June. As the works to the house proceeded the connections for the swimming pool were put into place and internal access to it from the house was provided. In August 1990 the appellant moved into part of the dwelling house, although work to it was not completed until later. The planning consent for the construction of the swimming pool was granted in May 1991 and for the annexe in March 1992. The latter was on the basis that the lower part was a garage for the parking of vehicles and the first floor was accommodation incidental to the enjoyment of the existing property and not occupied separately from it. Work on the swimming pool began in February 1993 for completion later that year.
The commissioners allowed the zero-rating of the house but refused it in relation to the construction of the annexe and the swimming pool.
The appellant contended that: (1) the legislation permitted the zero-rating of "the construction of a building designed as a dwelling" and that the house, the annexe and the swimming pool should be considered together as "the building" because together they constituted one dwelling; (2) as the annexe was a garage built at the same time as the house it should be zero-rated under Value Added Tax Act 1983, Sch. 5, Grp. 8, Note (2); and (3) neither the annexe nor the swimming pool was an "alteration or enlargement of an existing building", nor, in the case of the swimming pool an "extension or annexation" to it, within the meaning of Note (9), as there was no "existing building" until the whole project was completed in August 1993. All the works constituted one project, namely the construction of a dwelling house, which had been carried out in stages.
The commissioners contended that: (1) apart from a garage which was dealt with separately in Value Added Tax Act 1983, Sch. 5, Grp. 8, Note (2) no building that was not a dwelling was entitled to zero-rating under Value Added Tax Act 1983, Sch. 5, Grp. 8, item 2; (2) if all the work had been done at the same time it would have been zero-rated but in fact it consisted of three separate buildings, each of which had a separate planning consent obtained at a separate time so that the entirety of the work could not be described as "in the course of construction" of a building designed as a dwelling; (3) although it was accepted that the annexe was not an enlargement of an existing building it could not be regarded as a building in its own right. Part of it comprised accommodation but it was not "designed as a dwelling"; and (4) the swimming pool was "an enlargement" of an existing building or an "extension or annexation" to it.
Held, dismissing the taxpayer's appeal:
1. The use of the singular in the words "a building" meant that only one physical building could be zero-rated and that was the building designed as a dwelling. Consequently, a series of buildings was not entitled to zero-rating. This was emphasised by the fact that the legislation specifically referred to a garage as being a "dwelling", which would not be necessary if a series of buildings could be zero-rated.
2. The statements in Leaflet 708/2/90 - Construction Industry - that a building could be built in stages if they were specified in the original planning consent and that first occupation of part of the building did not prevent the zero-rating of work that was not then completed had to be seen only in the context that they represented the views of the commissioners and could not be treated as a binding authority. Paragraph 5 did not impose a requirement that a single planning consent was necessary for zero-rating to apply if the works fell within the provisions of Value Added Tax Act 1983, Sch. 5, Grp. 8. Paragraph 7 of the leaflet related to a specific situation and "first occupation" was only one factor to be considered when deciding when work finished.
3. The annexe could not be considered as one building with the dwelling house and swimming pool. It was a separate building. Accepting that it comprised a triple garage, albeit with staff accommodation, and that it was for occupation together with the dwelling house, for zero-rating to apply to it as a garage had to be "constructed at the same time" as the dwelling house. The works to the dwelling house were completed between February and August 1991 and work on the annexe did not commence until August 1992. Nor, even with the staff accommodation, could it be regarded as "a building designed as a dwelling".
4. Had the swimming pool been built at the same time as the dwelling house it would have been part of "a building designed as a dwelling" and entitled to zero-rating but there was an interval of 18 months between the completion of the one and commencement of construction of the other, so that it was not built in the course of the construction of the house but rather an "enlargement" of it or an "extension or annexation" to it with internal access.
[The tribunal set out the facts summarised above and continued as follows.]
The statutory provisions concerning zero-rating are contained in s. 16 [of the] Value Added Tax Act 1983, subsection (2) of which provides:
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16(2) A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 5 to this Act or the supply is of a description for the time being so specified.
Group 8 of Sch. 5 [to the Value Added Tax Act 1983] zero-rates certain supplies of goods and services relating to the construction of dwellings, etc., items 2 and 3 of Grp. 8 zero-rate:
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2. The supply in the course of the construction of-
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(a) a building designed as a dwelling or number of dwellings …
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(b) …
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2. of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity.
3. The supply to a person of-
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(a) materials; or
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(b) builders' hardware, sanitary ware or other articles of a kind ordinarily installed by builders as fixtures,
by a supplier who also makes to the same person supplies within item 2 of this Group … of services which include the use of the materials or the installation of the articles.
Notes (2) and (9) of Grp. 8 are also relevant and these provide:
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(2) "Dwelling" includes a garage constructed at the same time as a dwelling for occupation together with it.
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(9) The reference in item 2 to the construction of a building or work does not include a reference to-
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(a) the conversion, reconstruction, alteration or enlargement of an existing building or work; or
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(b) any extension or annexation to an existing building which provides for internal access to the existing building or of which the separate use, letting or disposal is prevented by the terms of any covenant...
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