Immanuel Church v Revenue & Customs (VALUE ADDED TAX - whether or not construction costs of new building work for church zero-rated) [2019] UKFTT 601 (TC)
[31]In Cantrell (No. 2) , at [17], the Vice Chancellor said: “An annexe is an adjunct or accessory to something else, such as a document. When used in relation to a building it is referring to a supplementary structure, be it a room, a wing or a separate building.” 32. In Cantrell at [4] Lightman J said: “The two-stage test for determining whether the works carried out constituted an enlargement, extension or annexe to an existing building is well established. It requires an examination and comparison of the building as it was or (if more than one) the buildings as they were before the works were carried out and the building or buildings as they will be after the works are completed; and the question then to be asked is whether the completed works amount to the enlargement of or the extension or the construction of an annexe to the original building. I must however add a few words regarding how the question is to be approached and answered, for this has been the subject of some lack of clarity (if not confusion) in a number of the authorities cited to me and it is the failure to approach and answer the question in this case in the correct way which flaws the decision. First the question is to be asked as at the date of the supply. It is necessary to examine the pre-existing building or buildings and the building or buildings in course of construction when the supply is made. What is in the course of construction at the date of supply is in any ordinary case (save for example in case of a dramatic change in the plans) the building subsequently constructed. Secondly the answer must be given after an objective examination of the physical characters of the building or buildings at the two points in time, having regard (inter alia) to similarities and differences in appearance, the layout, the uses for which they are physically capable of being put and the functions which they are physically capable of performing. The terms of planning permissions, the motives behind undertaking the works and the intended or subsequent actual uses are irrelevant, save possibly to illuminate the potential for use inherent in the building or buildings.” 33. The first point to be established following Cantrell is that the judgement is to be made at the time of the supply, ie, at the time of the construction. The original Design and Access Statement is therefore of limited use. What matters is the building as it was eventually built, not the original plans. 34. On that basis, the building which was eventually built shared a dog-leg wall with the church building and was connected to the church building by two fire escape doors, one of which was locked closed and could not be opened from either side and the other of which could only be opened from the church side. The fire escape doors were therefore of very limited value as an inter-connection between the new building and the church. 35. The new building was however also connected to the hall at the rear of the church building, by a covered corridor area which runs along the back of the church and the new extension/annexe and along the length of the hall building. This corridor is covered and has doors at both ends, but it has no heating. 36. In St Brendan’s the new building in question in that case was connected to existing buildings by a covered bridge, at first floor level, which similarly had doors at both ends but no heating. In St Brendan’s it was held that this was not sufficient to render the new building part of the existing building and that the new building was in fact to be treated as a separate building for the purposes of zero-rating. 37. In this case I come to the same conclusion as regards the linking corridor, in that I find that the existence of this corridor does not render the new building an extension of the hall building. Even if it were considered that this corridor was an effective link to the hall building I do not believe that this would determine the issue as to whether the new building is an extension or an annexe to this hall building. 38. Nevertheless, the new building is undoubtedly linked to the church building because it shares a common wall, a dog-leg wall, along the whole of its length. Does this make it an extension of the existing building or an annexe to that building? 39. Lightman J made it very clear in Cantrell that the actual use to which the building is subsequently put is of relatively limited importance. What is important is to consider:(1) the similarities and differences in appearance,(2) the layout, the uses for which they are physically capable of being put, and(3) the functions which they are physically capable of performing. 40. As regards appearance, the new building is of a totally different design. It is modern in style and constructed from dark powder coated aluminium and glass, totally different from the very old-fashioned and austere appearance of the existing church, which is typical of brick built churches from the early part of the 20 th Century. 41. As regards its layout, the new building is clearly not suitable for use as a church, although it could perhaps be used for similar purposes to those for which the hall is used, even though it is not in practice so used at present. It is not however directly attached to the hall building, such that it might be regarded as an extension of the hall building, and the only integration with the church building is via the fire escape doors, which can only be operated from the church side. These doors could perhaps be adapted by the fitting of new door furniture such that they could be opened from both sides, but this was not the case at the time of the supply of the building services, which is the point in time at which I am required to carry out the necessary comparisons. 42. It might be asked if the new building could be considered to be an extension of the church building if, for instance, it could be used as a social/coffee area for the congregation following a Sunday service. The church building already has its own coffee/welcome area, at the front of the church, and does not need an additional area of this nature. However, given that the only access between the church building and the new building would be via a single set of fire escape doors that can only be opened from the church side, I do not consider that the new building could satisfactorily be used as an extension to the church building in this manner. 43. It was suggested that the new building might be used by church-goers as an additional toilet facility. The existing church building does contain toilet facilities but it was suggested that the new building might provide additional toilet facilities via the inter-connecting doors. However, although these interconnecting doors might provide a means for church-goers to leave the church to make use of the toilet facilities, they would be unable to re-enter the church other than by exiting the new building via its main entrance and re-entering the church by its main entrance. This does not therefore seem a likely or sensible use of the new building. 44. In Cantrell (No.2) , the Vice Chancellor described an annexe as being: “an adjunct or accessory to something else, such as a document. When used in relation to a building it is referring to a supplementary structure, be it a room, a wing or a separate building.” 45. In my view, having considered the factors set out by Lightman J in Cantrell , the new building under consideration in this appeal is a supplementary structure. It is not an extension to the existing buildings, lacking as it does any ability to be used for any common activities with existing buildings. It is simply too separate from the hall to be used for a common activity and it cannot be used for a common activity with the church because the only connection with the church is via a single set of fire escape doors which can only be opened from the church side. 46. I therefore find that the new building is an annexe for the purposes of Notes 16 and 17 to Group 5 Sch 8 VATA. HMRC has already conceded that the new building fulfils the tests set out in Note 17 (a) and (b) and I therefore find that the new building qualifies for zero-rating as contended by The Church. Decision 47. For the above reasons therefore I have decided that this appeal should be ALLOWED. 48. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. PHILIP GILLETT TRIBUNAL JUDGE RELEASE DATE: 24 SEPTEMBER 2019