Appeal Collins & Beckett

19212

Protected Building – work done in relation to listed building and pool complex - whether zero rated as approved alteration - Item 2 of Group of Schedule 8 VATA 1994 - Did work create separate building - in part yes - to that extent appeal dismissed.

LONDON TRIBUNAL CENTRE

COLLINS AND BECKETT LIMITEDAppellant

- and –

THE COMMISSIONERS OF CUSTOMS AND EXCISERespondents

Tribunal: Judith Powell (Chairman)

Tym Marsh(Member)

Sitting in public in London on 31 March 2005

Rupert Baldry of Counsel for the Appellant

Shaheen Rahman of Counsel for the Respondents

DECISION

Introduction

1.The Appeal before the Tribunal is that of Collins and Beckett Limited against a decision of the Commissioners (set out in a letter from them dated 19 December 2003) that work carried out at the property known as Carldane Court Much Hadham was not a supply in the course of an approved alteration of a protected building within Item 2 of Group 6 of Schedule 8 to the Value Added Tax Act 1994 ("VATA"). The consequence of the decision is that the work is not zero rated for value added tax purposes. The Appellant submitted that the 19 December 2003 assessment to tax and interest in the total amount of £94,008.70 relates to a supply which it considers to be zero rated on the basis that the supply was made in the course of an approved alteration of a protected building within Item 2 of Group 6 of Schedule 8 to VATA.

2.The Appellant is the building company which carried out the disputed work at Carldane Court. We heard oral evidence from Simon Patrick Howard-Dobson. Mr Howard-Dobson is principal partner of Patrick Howard Design Associates ("PHD"). PHD were employed by the owners of Carldane Court to advise them in connection with a design concept involving a "pool complex" at Carldane Court.

The Statutory Provisions

3.The effect of Section 30 of VATA is that if a supply falls within Item 2 of Group 6 of Schedule 8 of VATA ("Item 2") it is zero rated. Various Notes apply for the interpretation of Group 6.

Item 2 provides as follows:-

"The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity".

4.It is common ground that Carldane Court is a residential grade 2 listed building and is a "protected building" within the meaning given to that expression by Note (1)(a) to Group 6 of Schedule 8 of VATA. Two of the other notes to Group 6 are also relevant.

5.First, the relevant part of Note 6(c) provides that "approved alteration" means:-

"…..works of alteration which may not …. be carried out unless authorised under, or under any provision of ….. Part 1 of the Planning (Listed Buildings and Conservation Areas) Act 1990…..and for which, …. consent has been obtained under any provision of that Part but does not include any works of repair or maintenance, or any incidental alteration to the fabric of a building which results from the carrying out of repairs, or maintenance work."

6.Secondly Note 10 provides that "for the purposes of Item 2 the construction of a building separate from, but in the curtilage of, a protected building does not constitute an alteration of the protected building".

The Facts

7.During the evidence of Mr Howard-Dobson the Tribunal was shown almost thirty photographs to illustrate what he told us about the work done at Carldane Court.

8.Carldane Court is a Grade 2 listed building described fully in the statutory listing and is owned by a Mr and Mrs Gordon Morrison. The listing does not mention any swimming pool facilities.

9.At some time (believed to be 1988) a former open air swimming pool to the east of the house had been covered by an industrial greenhouse of aluminium and plastic construction. Listed building consent for that construction was never obtained. It seems to be agreed that, because it had been in existence for in excess of ten years by the time the disputed works were contemplated, it was by then deemed to have consent by virtue of the failure of the local planning authority to take an enforcement action. The structure was not physically connected to the house at any time.

10.On 22 July 1998 Hertfordshire County Council had granted listed building consent for works to be carried out at Carldane Court described in the consent as "rebuilding swimming pool enclosure and pedestrian link to house". The consent was subject to several conditions including that "notwithstanding the consent hereby granted, none of the timbers forming the structural frame of the building shall be cut removed or otherwise altered without the prior consent in writing of the local planning authority". The reason given for this condition was "to ensure the historic and architectural character of the building is properly maintained". This consent had been obtained prior to the involvement of PHD. No work had been done in reliance on this consent when PHD were first consulted by the owners of Carldane Court about this project.

11.Mr Howard-Dobson told us that the owners' brief to PHD was to find a means of bringing the pool complex "into the house" and of making it fit in with the house itself. PHD put forward a proposal and planning and listed applications were submitted and registered by the local authority in September 2000. After some period of consultation, on 8 March 2001 PHD obtained consent described as "minor extensions and extensions to swimming pool building plus remodelling of façade. Amendment to glazed link already approved". The March 2001 consent included conditions - including the one specified in the 1998 consent and already described above concerning the timber frame structure.

12.During the construction works a window in the northern range of the house was closed and a new doorway was formed. This doorway led into a passage. The roof in this part of the house was altered. The previous pitched roof was replaced in part with a flat roof and the brick work was extended to form a parapet edge to the remaining pitched and new flat roofed elements. This form then continued over the connecting passage way and onto the leisure complex. The new works were constructed on piled foundations designed to preserve mature trees and these foundations were extended so as to underpin the corner of the house where the passage way connects to it. The design of the new glazed corridor which connects the house to the leisure complex was based upon a glazed corridor which was already a feature of the house and described in the listing.

13.The old "greenhouse structure" was demolished and all the pavings were removed. The original pool had a Roman end which was removed and the pool was squared off. The pool tank was retained. The pool complex itself is a basic rectangular shape (similar to the original "greenhouse" building) but it also features pavilion detailing (not a feature of the previous building) all of which is bricked to a low level with rendered and glazed walls above. The rendered areas have pargetting similar to the pargetting on the original house. The visible roofs are of lead and match other lead areas of the house in material and construction detail. The house has half timbered black and white elements and the joinery and glazing used in the construction works is of a black and white effect.

14.The pool complex itself contains a large sitting and dining area complete with a modern finish; it contains a small kitchenette and bar and full entertainment package of sound and light systems and cinema as well as a sanarium and exercise area and, of course, it includes the pool which utilised the pre existing pool tank.

15.The leisure complex can be reached directly from the original house since the new glazed passage leads out of the newly constructed door from a room in the house described as a small library and connects at the other end to the complex. There are also doors which lead directly into the garden both from the new glazed passage and from the new complex. The glazed corridor is sufficiently wide to accommodate seating and items of furniture but the photographs showed it to have the general appearance of a corridor rather than of a conventional room.

16.During the course of the works, it was necessary to cut into the timbers of the original structure and because of the condition attaching to the listed building consent and covering this type of work, further consent was needed and was obtained before this was done.

Arguments

17.The Appellant argued that all the construction services in question were supplied in the course of an approved alteration of a protected building falling within Item 2. It was submitted that neither Note 6 nor Note 10 affects the application of Item 2 because the works were works of alteration and not of repair or maintenance and did not involve the construction of a separate building. The works could not have been carried out without consent which was duly obtained. Although the structure of the original house was not very much disturbed by the works the house was altered and Mr Baldry referred to two cases as relevant to the meaning of "alteration" which he submitted means in the context of item 2 any alteration to the fabric of the building which is not slight or trivial. What was done was, applying ordinary English, clearly an alteration. The listed or protected building was altered by the addition of a new structure which was not a separate building and we were referred by him to a case with similar facts in support of this. And, finally, because of the provisions of section 1(5)((a) Planning (Listed Buildings and Conservation Areas) Act 1990 and since the new work was joined to the listed building, the original house plus the work done was together treated as a listed building. Although Mr Baldry referred us to a number of cases his argument was that, in a case such as this, the authorities are not directly helpful either because the individual facts were so important to the decision in each case or because although the authorities concerned the interpretation of the same word, that word had been used in a slightly different context.

18.The Commissioners, on the other hand, say that the work was not an alteration but constituted the reconstruction or alteration of the 1988 "greenhouse" structure. This was not part of the listed building and no part of section 1(5) Planning (Listed Buildings and Conservation Areas) Act 1970 applied to treat it as such. They say that previous case law does not support a different conclusion and that each case must be decided on its facts. The new passage merely links the two buildings. With respect to the new passage they say that the alteration to the house is not to change it in a meaningful way so that work on the passage is standard rated and is therefore not an alteration contemplated in Public Notice 708 (section 9.3). They accept that the work to the house in creating the access to the passage is an alteration within item 2 and have allowed that work to be zero rated.

Alteration

19.ACT Construction Limited v Customs and Excise Commissioners [1981] 1WLR 1542 involved the construction of the word "alteration" in Item 2 of Group 8 of Schedule 4 to the Finance Act 1972. Item 2 of that Group concerned the "construction alteration or demolition" of any building. In that case note (2) provided that "Item 2 does not include - (a) any work of repair or maintenance". The disputed work in ACT involved underpinning operations to a number of houses which consisted of the construction of an additional foundation to each affected building. The question in that case was the type of work that amounted to "alteration". Lord Roskill approved the approach of Neill J in Customs and Excise Commissioners v Morrison Dunbar Limited [1979] STC 406 where, in the same context, he held that the word "alteration" is an alteration of the building and therefore one which involves some structural alteration. Mr Baldry, acknowledged that the context in which the word "alteration" appeared in Finance Act 1972 was different to the present case but submitted that this did not justify a different meaning being given to it and that the work involved some structural alteration of the original house at Carldane Court which was manifestly altered by it.

20.Customs and Excise Commissioners v Viva Gas Appliances Limited [1983] 1WLR 1455 the extent of the work covered by the word "alteration" was considered. It was decided that the word "alteration" in the context of Item 2 Group 8 Schedule 4 to Finance Act 1972 "covered all works to the fabric of an identified building which fell short of complete erection or complete demolition; that "alteration………of any building" within the meaning of the Item in that Group included "any alteration to the fabric of the building save that which was so slight or trivial that its existence could be ignored under the de minimis rule;" and at page 1449 Lord Diplock said:-

"Pearlman v Keepers and Governors of Harrow School [1979] QB56 was cited in argument in Customs and Excise Commissioners v Smitmit Design Centre Limited [1982] STC 525 a decision of Glidewell J reached after the judgment of this house in the ACT Construction case. Glidewell J accepted that the alteration must affect the structure of the building to some material extent - by which I take it he meant that the effect upon the structure must not be so slight or trivial that the Court is obliged to ignore its very existence under the rule of law expressed in the Latin maxim de minimis non curat lex. Glidewell J however went on to lay down a further criteria borrowed without acknowledgement from Geoffrey Lane LJ's judgment in Pearlman -v- Keepers and Governors of Harrow School [1979] QB56. Secondly, he said [1982] STC 523, 534): "the alteration must be substantial in relation to the building as a whole". He gave no reason for this proposition which was clearly intended to lay down a test for qualifying for zero rating under item 2 that was more difficult to satisfy than that which the de minimis rule itself imports. Forbes J in the instant case was unable to find any warrant for the imposition of this second and more severe criteria in the statutory words in item 2. Nor, with respect can I. If the alteration to the fabric of the building satisfies the de minimis rule I can see no reason why it should not fall within the statutory description "alteration….. of any building" whether the extent to which it falls outside that rule be great or small".

21.And so Mr Baldry submitted that, although in this case the word "alteration" does not appear between the words "construction" and "demolition" as it did in Item 2 of Group 8 of Schedule 4 of Finance Act 1972, these cases are nonetheless helpful in the interpretation of the word "alteration" in the present context. If that is so there is an alteration where the work is not de minimis and involves alteration to the fabric of the building. In particular he urged us that (provided it was not de minimis) it was not appropriate to concentrate on the nature or extent of the alteration to the fabric of the original building because an extension is a clear example of an alteration and wherever there is an extension the original building its fabric will be altered to varying degrees He referred to Section 9.3.12 of Notice 708 which gives an extension as an example of the word alteration. Instead to form a view of what has been done he argued that it is necessary to look at the whole structure and consider the final effect. If that approach is adopted in this case the final effect is of one continuous structure and on the ordinary meaning of the word he urged us to find that this was clearly an alteration.

22.The Commissioners disagreed with this approach. On the question whether an alteration had taken place Ms Rahman conceded that the Commissioners had applied zero rating to the work done on the original building with the result that this must have been an alteration. In relation to the work on the glazed corridor she referred to section 9.3 of Notice 708 which provides that an alteration must change the structure in a meaningful way. And in relation to the pool complex itself the Commissioners argument was that this was the alteration or reconstruction of the 1988 building and that building was a separate building and was not treated as part of the listed building by section 1(5)(b) of the Planning (Listed Buildings and Conservation Areas) Act 1990 since it was a separate building that did not form part of the land since before 1 July 1948. Work done to that separate building was not work done to a protected building and that cannot be made into a protected building by a link for these purposes back to the original protected building so that it joins that building and falls within section 1(5)(a) of the 1990 Planning Act.

Separate Building

23.Works of alteration which otherwise satisfy Item 2 do not qualify for zero rating if what is done amounts to the construction of a separate building because of Note 10. Mr Baldry referred the Tribunal to the case of Customs and Excise Commissioners v Arbib [1995] STC 490 in support of his argument that Note 10 did not apply in this case.