Excavation Spoil — Aggregates levy — Construction of warehouse — Respondent contracting to remove rock and soil from building site — Whether respondent exempt from levy on removal of spoil to lay foundations — Appeal dismissed
The respondent entered into a contract with a site owner to remove spoil, namely poor quality rock mixed with soil, to enable the construction of a new warehouse and a lorry park. The appellants considered that the excavations amounted to the making of taxable supplies of aggregate and therefore rendered the respondent liable to registration for aggregates levy. The respondent appealed to the VAT and Duties Tribunal.
Section 16 of the Finance Act 2001 (as amended by the Finance Act 2002) imposed a levy on aggregate (rock, sand or gravel) subjected to commercial exploitation. Under section 17(3)(b), aggregate was exempt from a levy if it were removed from the ground on the site of a building or proposed building during excavations in connection with the modifications or erection of the building, and exclusively for the purpose of laying foundations or any pipe or cable.
In order to lay the foundations of the warehouse at the correct level, the superjacent aggregate (aggregate A), which covered an area co-extensive with the footprint of the proposed building, had to be removed. The lorry park was to be constructed to the south of the new building and needed foundations of high-quality compacted stone. In order to lay those foundations and the drainage system for the new building, further superjacent aggregate (aggregate B), which covered an area co-extensive with the footprint of the lorry park, also had to be removed. In addition, aggregate lying further to the south (aggregate C) had to be removed from the slope in order to make a safe bank for the lorry park. The tribunal decided that aggregate A and B would be exempt from the levy, but that aggregate C would not. The appellants challenged the decision in respect of aggregate B.
Held: The appeal was dismissed.
The tribunal was entitled to hold that “the site of … [the] proposed building” in section 17(3)(b), included the whole area of land upon which building would be undertaken. The phrase had to be given a sensible, workable meaning, that corresponded to what would ordinarily be regarded as “the building site”, namely, the entire area upon which the builders would be working for the construction of the building and the laying of any services serving it.
The question as to whether the excavation of aggregate B was “in connection with” the erection of building was a question of fact for the tribunal, and the court was not prepared to hold that its finding was not one to which it was entitled to come. There was an undisputed clear functional link between the proposed warehouse and the lorry park, and the excavations of aggregate A and B were to be carried out at the same time. There was nothing in the statutory language requiring the “connection” to be close. Furthermore, the drains serving the building were to be laid beneath the lorry park, and part of aggregate B had to be removed for that purpose.
Craig Sephton QC (instructed by the solicitor to Customs & Excise) appeared for the appellants; Craig Howell Williams (instructed by Hewitsons, of Northampton) appeared for the respondent.
Eileen O’Grady, barrister
