Almond v Revenue And Customs [2009] UKFTT 177 (TC)

FTT-Tax
Almond v Revenue And Customs
[2009] UKFTT 177 (TC) · 2009-07-17
[1][2009] UKFTT 177 (TC) TC00132 Appeal number: LON/2009/0164 Value Added Tax - DIY builders scheme - claim for refund refused - VAT Act 1994 s35, Sch 8 Group 5, Notes (16), (18) - original buildings substantially demolished - front façade and party walls retained - whether retention of front façade a requirement of planning consent - yes - conditions for recovery of relief satisfied - appeal allowed FIRST-TIER TRIBUNAL TAX KEVIN ALMOND Appellant - and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents Tribunal: Nicholas Aleksander (Tribunal Judge) Mrs C E Farquharson Sitting in public in London on 6 July 2009 The Appellant in person Mr E Rowbotham instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents © CROWN COPYRIGHT 2009 DECISION This appeal relates to the claim by the Appellant ("Mr Almond") for a refund of VAT under the "DIY Builders and Converters Refund Scheme" relating to the construction of a house undertaken by Mr Almond at Whittlesey, Cambridgeshire. Mr Almond represented himself and gave evidence. In addition we had a bundle of documents, which included copies of the planning application (and plans) made by Mr Almond in relation to the Whittlesey premises, copy of the consents granted by Fenland District Council, photographs of the premises at various stages during the construction process, and copy correspondence. VAT registered developers can recover, through their VAT returns, the VAT on the costs they incur on building new dwellings. The DIY Builders and Converters Refund Scheme puts DIY builders in a broadly similar position, by refunding VAT they incur on their main construction costs. In this case, Mr Almond purchased a semi-detached house in Whittlesey which was in an extremely bad state of repair. He demolished the house and outbuildings, apart from the front facade of the house and part of its eastern wall (the wall adjoining the house to which it was semi-detached). He then built a new house incorporating the facade and the part eastern wall, and also a separate garage incorporating a guest suite. The Law Section 35 of the VAT Act 1994, so far as material, is as follows:
"(1) Where - (a) a person carries out work to which this section applies, (b) his carrying out of the works is lawful and otherwise than in the course or furtherance of any business, and (c) VAT is chargeable on the supply, acquisition or importation of any goods used by him for the purposes of the works, the Commissioners shall, on a claim made in that behalf, refund to that person the amount of VAT so chargeable. (2) The works to which this section applies are - (a) the construction of a building designed as a dwelling … (4) The notes to Group 5 of Schedule 8 shall apply for construing this section as they apply for construing that Group."
At first glance, it seems that Mr Almond qualified for the refund referred to in subsection (1). He constructed a building designed as a dwelling and did so otherwise than in the course of a business, since the resulting dwelling was intended for occupation by himself and his family. However, the Respondents ("HMRC") say, the notes to Group 5 of Schedule 8, imported by subsection (4), defeat Mr Almond's claim. The relevant notes are as follows:
"(16) For the purposes of this Group, the construction of a building does not include - (a) the conversion, reconstruction or alteration of an existing building; or (b) any enlargement of, or extension to, an existing building except to the extent the enlargement or extension creates an additional dwelling or dwellings; …" "(18) A building only ceases to be an existing building when: (a) demolished completely to ground level; or (b) the part remaining above ground level consists of no more than a single façade or where a corner site, a double façade, the retention of which is a condition or requirement of statutory planning consent or similar permission."
In considering whether a building has been demolished, the retention of party walls forming part of a neighbouring property are ignored. In this case, the front facade of the house was retained, as was part of the eastern wall. The questions for the Tribunal were, therefore, whether: (1) The retained part of the eastern wall and chimneys comprised a party wall; and (2) The retention of the front facade was a condition or requirement of statutory planning consent or similar permission. Background facts Mr Almond purchased a semi-detached house in Whittlesey in early 2002. The property is located in the Whittlesey Conservation Area. The house was over one hundred years old and located on one of the oldest streets in Whittlesey. The property's façade (its north wall) faces directly onto the street. The house to which it was semi-detached is to the east. In the back garden was a stable and pig sty. The property had been neglected and was in a bad state of repair, and the stable and pig sty were in a dangerous condition. Because the house was in a conservation area, Mr Almond had preliminary discussions with both the local planning department and the conservation officer at the local council (Fenland District Council) about his intentions. His original intention was to demolish the existing house and outbuildings in their entirety and build an entirely new house. He was told that although the council might grant the necessary permissions to enable him to do this, they would require him to reclaim the bricks and build the front façade of the new house so that it looked identical to the front façade of the existing house. Mr Almond therefore made the decision to retain the existing front façade of the house, and demolish and build behind the existing façade - a decision that the local council were happy with. On 25 February 2002, Mr Almond applied to Fenland District Council for the necessary planning consents. The application was accompanied by a number of pans and drawings prepared by Mr Almond. On 22 April 2002 the council granted consent subject to the development being carried out in accordance with the application, plans, drawings and any clarifying or amending information submitted by Mr Almond. In addition there were a number of express conditions, none of which are relevant to this appeal. At the time Mr Almond applied for planning consent, he reviewed HMRC's booklet 719 on VAT refunds for DIY builders and converters. When Mr Almond drew up the plans for the construction work, he thought that the only party structure shared with the adjoining property were a few courses of brickwork at the top of the main chimney stack. As far as he could ascertain, the eastern wall of the house (other than the brickwork at the top of the main chimney) merely abutted against the wall of the adjoining property. Because the front façade was to be retained and also part of the eastern wall, Mr Almond was concerned whether he would be entitled to a VAT refund under the DIY scheme. So on 8 April 2002, Mr Almond wrote to HMRC to obtain confirmation that he would be entitled to a VAT refund. On 24 April 2002 Officer George of the Peterborough VAT Office wrote to Mr Almond and confirmed that he would be entitled to a VAT refund. Mr Almond in giving evidence told us that copies of the construction plans were enclosed with his letter of 8 April, even though there was no direct reference to the plans in his letter. In cross examination Mr Rowbotham challenged whether the plans were included. We are satisfied that the plans were included with the letter, and Mr Almond's oral evidence is supported by the fact that Officer George makes reference in his letter to the construction of the garage and guest suite. There was no mention of a garage in the text of Mr Almond's letter, and so Officer George must have had sight of the plans (where these are shown). Although Mr Almond initially believed that only a few courses of brickwork at the top of a chimney were shared with his neighbour, as he commenced demolition work, he discovered that there were more shared structural features than were initially visible. In particular two chimney stacks on the eastern side of the property were shared (not just the top few courses of brickwork of just one chimney stack), and parts of the brickwork of the eastern wall were structurally bonded into the wall of the adjoining property. If the eastern wall of his house was demolished completely, then Mr Almond believed that the neighbouring property would collapse. Mr Almond's evidence on this was not challenged by HMRC. Apart from the front façade and the party walls, the house was demolished to ground level. The outbuildings, the stable and pig sty, were completely demolished to ground level. Mr Almond then built his new house behind, and incorporating, the existing façade and the party walls. He largely did the work himself. In the back garden he built a separate garage, incorporating a guest suite - all of these in accordance with the plans attached to his planning application. A completion certificate was issued by Fenland District Council under the requirements of the building regulations on 8 August 2008. On 21 August 2008, Mr Almond submitted form VAT 431 claiming a VAT refund under the DIY builders and converters scheme. This claim was refused, and on review, the refusal was upheld. Mr Almond then appealed to the VAT and Duties Tribunal. Case for HMRC Mr Rowbotham, representing HMRC, was content for the party wall issue to be determined as a matter of fact by this Tribunal, and did not challenge Mr Almond's evidence in this regard. We have no hesitation in finding that the retained parts of the eastern wall and the retained chimneys were party walls. The only issue in contention is whether the retention of the front façade was a condition or requirement of statutory planning consent or similar permission. If it was such a condition or requirement, then Mr Almond's appeal succeeds. If there was no such condition or requirement, then his appeal fails. The decisions of the High Court and the Court of Appeal in R v Ashford BC ex parte Shepway [1998] EWHC Admin 488 and Carter Commercial Developments v SoS Transport, Local Government and the Regions [2002] EWCA Civ 1994 govern the interpretation of planning consents. Unless the planning consents are (on their face) unclear, then recourse cannot be had to documents or other evidence external to the consents themselves (or the documents incorporated into the consents by reference). In this case, the application form and plans are incorporated into the consent by express reference, and therefore form part of the planning consent. Mr Rowbotham notes that the planning consent is subject to a number of conditions. However none of these conditions required, in terms, that the front façade of the house be retained. For this reason he submits that Mr Almond's appeal must fail. Mr Rowbotham referred us to correspondence between Mr Almond and the district conservation officer, where the conservation officer confirmed that they would have recommended that as much as possible of a historic building (such as Mr Almond's house) was retained as it was in a conservation area. Mr Rowbotham therefore submits that the retention of the front façade of the building amounted to a recommendation only, and it was not a requirement of the planning consent. We disagree. It was an express requirement of the planning consent that the development was undertaken in accordance with the plans. The plans (which were produced in evidence and which we reviewed) show that the front façade of the property is to be retained. This is apparent from the notes and annotations on the drawings and in the detail showing how the new walls and joists are to be attached to the existing façade. We therefore find that it was a requirement of the planning consent that the front façade be retained. This is consistent with the fact that the property is an old property in a conservation area. We are of the opinion that had Mr Almond demolished the front façade, the planning authority would have taken enforcement action. In the light of the decisions of the High Court and Court of Appeal in R v Ashford ex parte Shepway and in Carter Commercial Developments, in interpreting the planning consent, absent some ambiguity, we cannot consider the correspondence that Mr Almond had with the district conservation officer, or the various discussions that he had initially with the conservation officer and the planning department about the consents that they might be willing to grant. There is no such ambiguity. Even if there was, reference to such correspondence would not assist HMRC. Whether Fenland District Council might have granted some form of planning approval which would have allowed for the demolition of the front façade is purely hypothetical. The fact is that Mr Almond did not apply for consent to demolish the house in its entirety (and because the property is in a conservation area, consent to demolition would be required), and no such consent was given. Mr Rowbotham made reference to a number of decisions of the VAT and Duties Tribunal in the course of his submissions. In particular, in the cases of Pugh (2000) 17013, Evans (2001) 17264, Halliwell (2006) 19735 and Hall [2009] UKFTT 58 (TC), the tribunal held that the retention of a wall was not a condition or requirement of the planning permission for the relevant development. In the cases of Midgley (1997) 15379 and Naylor (2001) 17305 the tribunal held that the retention of a wall was a requirement of the relevant planning consent. None of these decisions set out any general principles and each of them have to be understood in the context of their particular facts and circumstances, and the precise terms of any planning consent given and any plans incorporated by reference into the consent. We do not find any of them of assistance in reaching our decision. Conclusion In these circumstances, we are of the opinion that Mr Almond complied with note 18(b) of Group 5 to Schedule 8, VAT Act 1994. It was a condition or requirement of the statutory planning consent that the front façade be retained. We are also satisfied that the parts of the wall and chimneys that were retained on the eastern side of the property were party walls. Accordingly, we decide that Mr Almond's appeal is successful, and that he is entitled to a refund of VAT under the DIY builders and converters scheme, together with interest under s84(8) VAT Act 1992. In the event that the amount of the refund and interest cannot be agreed between the parties, we give liberty to apply to this Tribunal to determine the amount. Costs The Notice of Appeal was dated 23 December 2008 and was received by the VAT and Duties Tribunal on 29 December 2008. Pursuant to paragraph 6, Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (2009 No 56), the proceedings automatically continued before the First Tier Tribunal (Tax Chamber). By virtue of sub-paragraph (7), the Tribunal retains its discretion to award costs as if the proceedings had been before the VAT and Duties Tribunal. As Mr Almond was successful in his appeal, he would normally be entitled to costs. We therefore order that HMRC to pay his costs on the standard basis, to be determined by the Tribunal in the absence of agreement between the parties. Nicholas Aleksander TRIBUNAL JUDGE RELEASE DATE: 17 July 2009 Cases cited in submissions but not referred to in this decision: Bugg (1997) 15123 Bremner (1997) 15309 This appeal relates to the claim by the Appellant ("Mr Almond") for a refund of VAT under the "DIY Builders and Converters Refund Scheme" relating to the construction of a house undertaken by Mr Almond at Whittlesey, Cambridgeshire. Mr Almond represented himself and gave evidence. In addition we had a bundle of documents, which included copies of the planning application (and plans) made by Mr Almond in relation to the Whittlesey premises, copy of the consents granted by Fenland District Council, photographs of the premises at various stages during the construction process, and copy correspondence.[2]VAT registered developers can recover, through their VAT returns, the VAT on the costs they incur on building new dwellings. The DIY Builders and Converters Refund Scheme puts DIY builders in a broadly similar position, by refunding VAT they incur on their main construction costs. In this case, Mr Almond purchased a semi-detached house in Whittlesey which was in an extremely bad state of repair. He demolished the house and outbuildings, apart from the front facade of the house and part of its eastern wall (the wall adjoining the house to which it was semi-detached). He then built a new house incorporating the facade and the part eastern wall, and also a separate garage incorporating a guest suite. The Law[3]Section 35 of the VAT Act 1994, so far as material, is as follows:
"(1) Where - (a) a person carries out work to which this section applies, (b) his carrying out of the works is lawful and otherwise than in the course or furtherance of any business, and (c) VAT is chargeable on the supply, acquisition or importation of any goods used by him for the purposes of the works, the Commissioners shall, on a claim made in that behalf, refund to that person the amount of VAT so chargeable. (2) The works to which this section applies are - (a) the construction of a building designed as a dwelling … (4) The notes to Group 5 of Schedule 8 shall apply for construing this section as they apply for construing that Group."
[4]At first glance, it seems that Mr Almond qualified for the refund referred to in subsection (1). He constructed a building designed as a dwelling and did so otherwise than in the course of a business, since the resulting dwelling was intended for occupation by himself and his family. However, the Respondents ("HMRC") say, the notes to Group 5 of Schedule 8, imported by subsection (4), defeat Mr Almond's claim. The relevant notes are as follows:
"(16) For the purposes of this Group, the construction of a building does not include - (a) the conversion, reconstruction or alteration of an existing building; or (b) any enlargement of, or extension to, an existing building except to the extent the enlargement or extension creates an additional dwelling or dwellings; …" "(18) A building only ceases to be an existing building when: (a) demolished completely to ground level; or (b) the part remaining above ground level consists of no more than a single façade or where a corner site, a double façade, the retention of which is a condition or requirement of statutory planning consent or similar permission."
[5]In considering whether a building has been demolished, the retention of party walls forming part of a neighbouring property are ignored.[6]In this case, the front facade of the house was retained, as was part of the eastern wall. The questions for the Tribunal were, therefore, whether:(1) The retained part of the eastern wall and chimneys comprised a party wall; and(2) The retention of the front facade was a condition or requirement of statutory planning consent or similar permission. Background facts[7]Mr Almond purchased a semi-detached house in Whittlesey in early 2002. The property is located in the Whittlesey Conservation Area. The house was over one hundred years old and located on one of the oldest streets in Whittlesey. The property's façade (its north wall) faces directly onto the street. The house to which it was semi-detached is to the east. In the back garden was a stable and pig sty. The property had been neglected and was in a bad state of repair, and the stable and pig sty were in a dangerous condition.[8]Because the house was in a conservation area, Mr Almond had preliminary discussions with both the local planning department and the conservation officer at the local council (Fenland District Council) about his intentions. His original intention was to demolish the existing house and outbuildings in their entirety and build an entirely new house. He was told that although the council might grant the necessary permissions to enable him to do this, they would require him to reclaim the bricks and build the front façade of the new house so that it looked identical to the front façade of the existing house. Mr Almond therefore made the decision to retain the existing front façade of the house, and demolish and build behind the existing façade - a decision that the local council were happy with.[9]On 25 February 2002, Mr Almond applied to Fenland District Council for the necessary planning consents. The application was accompanied by a number of pans and drawings prepared by Mr Almond. On 22 April 2002 the council granted consent subject to the development being carried out in accordance with the application, plans, drawings and any clarifying or amending information submitted by Mr Almond. In addition there were a number of express conditions, none of which are relevant to this appeal.[10]At the time Mr Almond applied for planning consent, he reviewed HMRC's booklet 719 on VAT refunds for DIY builders and converters. When Mr Almond drew up the plans for the construction work, he thought that the only party structure shared with the adjoining property were a few courses of brickwork at the top of the main chimney stack. As far as he could ascertain, the eastern wall of the house (other than the brickwork at the top of the main chimney) merely abutted against the wall of the adjoining property. Because the front façade was to be retained and also part of the eastern wall, Mr Almond was concerned whether he would be entitled to a VAT refund under the DIY scheme. So on 8 April 2002, Mr Almond wrote to HMRC to obtain confirmation that he would be entitled to a VAT refund. On 24 April 2002 Officer George of the Peterborough VAT Office wrote to Mr Almond and confirmed that he would be entitled to a VAT refund. Mr Almond in giving evidence told us that copies of the construction plans were enclosed with his letter of 8 April, even though there was no direct reference to the plans in his letter. In cross examination Mr Rowbotham challenged whether the plans were included. We are satisfied that the plans were included with the letter, and Mr Almond's oral evidence is supported by the fact that Officer George makes reference in his letter to the construction of the garage and guest suite. There was no mention of a garage in the text of Mr Almond's letter, and so Officer George must have had sight of the plans (where these are shown).[11]Although Mr Almond initially believed that only a few courses of brickwork at the top of a chimney were shared with his neighbour, as he commenced demolition work, he discovered that there were more shared structural features than were initially visible. In particular two chimney stacks on the eastern side of the property were shared (not just the top few courses of brickwork of just one chimney stack), and parts of the brickwork of the eastern wall were structurally bonded into the wall of the adjoining property. If the eastern wall of his house was demolished completely, then Mr Almond believed that the neighbouring property would collapse. Mr Almond's evidence on this was not challenged by HMRC.[12]Apart from the front façade and the party walls, the house was demolished to ground level. The outbuildings, the stable and pig sty, were completely demolished to ground level. Mr Almond then built his new house behind, and incorporating, the existing façade and the party walls. He largely did the work himself. In the back garden he built a separate garage, incorporating a guest suite - all of these in accordance with the plans attached to his planning application. A completion certificate was issued by Fenland District Council under the requirements of the building regulations on 8 August 2008. On 21 August 2008, Mr Almond submitted form VAT 431 claiming a VAT refund under the DIY builders and converters scheme. This claim was refused, and on review, the refusal was upheld. Mr Almond then appealed to the VAT and Duties Tribunal. Case for HMRC[13]Mr Rowbotham, representing HMRC, was content for the party wall issue to be determined as a matter of fact by this Tribunal, and did not challenge Mr Almond's evidence in this regard. We have no hesitation in finding that the retained parts of the eastern wall and the retained chimneys were party walls.[14]The only issue in contention is whether the retention of the front façade was a condition or requirement of statutory planning consent or similar permission. If it was such a condition or requirement, then Mr Almond's appeal succeeds. If there was no such condition or requirement, then his appeal fails.[15]The decisions of the High Court and the Court of Appeal in R v Ashford BC ex parte Shepway [1998] EWHC Admin 488 and Carter Commercial Developments v SoS Transport, Local Government and the Regions [2002] EWCA Civ 1994 govern the interpretation of planning consents. Unless the planning consents are (on their face) unclear, then recourse cannot be had to documents or other evidence external to the consents themselves (or the documents incorporated into the consents by reference). In this case, the application form and plans are incorporated into the consent by express reference, and therefore form part of the planning consent.[16]Mr Rowbotham notes that the planning consent is subject to a number of conditions. However none of these conditions required, in terms, that the front façade of the house be retained. For this reason he submits that Mr Almond's appeal must fail. Mr Rowbotham referred us to correspondence between Mr Almond and the district conservation officer, where the conservation officer confirmed that they would have recommended that as much as possible of a historic building (such as Mr Almond's house) was retained as it was in a conservation area. Mr Rowbotham therefore submits that the retention of the front façade of the building amounted to a recommendation only, and it was not a requirement of the planning consent.[17]We disagree. It was an express requirement of the planning consent that the development was undertaken in accordance with the plans. The plans (which were produced in evidence and which we reviewed) show that the front façade of the property is to be retained. This is apparent from the notes and annotations on the drawings and in the detail showing how the new walls and joists are to be attached to the existing façade. We therefore find that it was a requirement of the planning consent that the front façade be retained. This is consistent with the fact that the property is an old property in a conservation area. We are of the opinion that had Mr Almond demolished the front façade, the planning authority would have taken enforcement action.[18]In the light of the decisions of the High Court and Court of Appeal in R v Ashford ex parte Shepway and in Carter Commercial Developments, in interpreting the planning consent, absent some ambiguity, we cannot consider the correspondence that Mr Almond had with the district conservation officer, or the various discussions that he had initially with the conservation officer and the planning department about the consents that they might be willing to grant. There is no such ambiguity. Even if there was, reference to such correspondence would not assist HMRC. Whether Fenland District Council might have granted some form of planning approval which would have allowed for the demolition of the front façade is purely hypothetical. The fact is that Mr Almond did not apply for consent to demolish the house in its entirety (and because the property is in a conservation area, consent to demolition would be required), and no such consent was given.[19]Mr Rowbotham made reference to a number of decisions of the VAT and Duties Tribunal in the course of his submissions. In particular, in the cases of Pugh (2000) 17013, Evans (2001) 17264, Halliwell (2006) 19735 and Hall [2009] UKFTT 58 (TC), the tribunal held that the retention of a wall was not a condition or requirement of the planning permission for the relevant development. In the cases of Midgley (1997) 15379 and Naylor (2001) 17305 the tribunal held that the retention of a wall was a requirement of the relevant planning consent. None of these decisions set out any general principles and each of them have to be understood in the context of their particular facts and circumstances, and the precise terms of any planning consent given and any plans incorporated by reference into the consent. We do not find any of them of assistance in reaching our decision. Conclusion[20]In these circumstances, we are of the opinion that Mr Almond complied with note 18(b) of Group 5 to Schedule 8, VAT Act 1994. It was a condition or requirement of the statutory planning consent that the front façade be retained.[21]We are also satisfied that the parts of the wall and chimneys that were retained on the eastern side of the property were party walls.[22]Accordingly, we decide that Mr Almond's appeal is successful, and that he is entitled to a refund of VAT under the DIY builders and converters scheme, together with interest under s84(8) VAT Act 1992.[23]In the event that the amount of the refund and interest cannot be agreed between the parties, we give liberty to apply to this Tribunal to determine the amount. Costs[24]The Notice of Appeal was dated 23 December 2008 and was received by the VAT and Duties Tribunal on 29 December 2008. Pursuant to paragraph 6, Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (2009 No 56), the proceedings automatically continued before the First Tier Tribunal (Tax Chamber). By virtue of sub-paragraph (7), the Tribunal retains its discretion to award costs as if the proceedings had been before the VAT and Duties Tribunal.[25]As Mr Almond was successful in his appeal, he would normally be entitled to costs. We therefore order that HMRC to pay his costs on the standard basis, to be determined by the Tribunal in the absence of agreement between the parties.

Cited in 5 later judgments