Derelict building — Construction work carried out — Supply of services in form of structural work done — Whether work amounted to conversion, reconstruction, alteration or enlargement of existing building — Whether supply thereby excluded from zero-rating for VAT purposes — VAT tribunal holding that work should be zero-rated — On appeal by the Commissioners High Court holding that existence of building was question of fact for tribunal — No ground for interfering with tribunal decision — Appeal dismissed — Judgment for taxpayer
The taxpayer owned land on the Sussex Downs on which stood a derelict 18th-century barn. The building was further damaged by storms in 1976. Later the roof fell in and the structure deteriorated leaving four walls surrounding a bed of nettles. Planning permission was granted expressly in terms of conversion and reconstruction of the barn into a dwelling, with conditions that the appearance of the building from the road should be preserved. The house was built in accordance with the planning permission using as much of the old barn as possible at a greater cost than if the site had been cleared and the building constructed from the ground up. The work commenced in September 1987 and was completed in April 1989.
A new wing and new roof were built with a complex underpinning operation being carried out. When the work was completed the building looked like an 1820s Sussex barn, although approximately 80% of the walls consisted of new material. A question arose whether the work done on the building was to be zero-rated for VAT purposes under the Value Added Tax Act 1983, Schedule 5, Group 8, item 2 as the taxpayer argued; or whether it was excluded from zero-rating by Note (1A) as being the “conversion, reconstruction, alteration or enlargement of any existing building” as the Commissioners contended. The Commissioners appealed against the decision of a VAT tribunal in favour of the taxpayer.
Held The appeal was dismissed.
1. Whether there was a new building was a question of fact and degree. “Building” was an ordinary word to be determined by the tribunal of fact in the context in which it appeared: see Commissioners of Customs and Excise v London Diocesan Fund [1993] STC 369.
2. The tribunal had taken the view that the ruined barn could not be regarded as an existing building. Note (1A) used the adjective “existing” in relation to “building” and the phrase was found in the context of a sentence dealing with the conversion, reconstruction etc of such a building. That suggests that the draftsman had in mind something that not only existed as a building but was also susceptible of conversion, reconstruction, etc. A derelict structure which was so far gone that it had no potential and no future as a building could not on that basis be properly described as an “existing” building. It was not susceptible of conversion or reconstruction: still less was it susceptible of “alteration or enlargement”.
3. One had to determine whether there was an existing building capable of conversion, reconstruction, etc. Only then could the question whether there had been conversion, reconstruction, etc be considered.
4. The tribunal’s finding that there was no existing building was not impugnable by the court. Since the tribunal was entitled to say that there was no existing building, the second question did not arise.
Melanie Hall (instructed by the solicitor to Customs & Excise) appeared for the Commissioners; Stephen Silman (instructed by Lewis Holman & Lawrence, of Lewes) appeared for the taxpayer.
