Schedule 8 to Value Added Tax Act 1994 – Major construction work within curtilage of listed house – Work including conversion of outbuilding to leisure use and provision of adjoining swimming pool – Whether to be zero-rated as work to “protected building” – Restrictive approach of European Court applied – Commissioners’ appeal allowed
The respondent firm of builders and development surveyors (the company) obtained a listed building consent to carry out a major redevelopment within the curtilage of a house in Northamptonshire under a contract with the house owner. The house, which had been built in 1830, possessed a courtyard at the rear, bounded on one side by a wall 9ft high and 15ft long. The wall linked the south-east corner of the house to the north-west corner of a long rectangular outbuilding, which had been built at the same time as the house, and had subsequently been used for storage and scullery purposes connected with it. Both the wall and the outbuilding were built of the same material as the rear of the house. Part of the development scheme called for the conversion of the outbuilding into an indoor games area with changing rooms and the construction of an adjoining indoor swimming pool (the disputed works).
The appellant commissioners raised a VAT assessment of £77,681, of which £32,639 was attributed to the disputed works. The company claimed that those works were zero-rated, under Group 6 of Schedule 8 to the Value Added Tax Act 1994, as services supplied “in the course of an approved alteration of a protected [ie listed] building”. The commissioners contended that, although the listing extended (for planning and related purposes) to the outbuilding, that building was not a “protected building” as defined in Note (1) to Group 6, as that expression was limited to a single building designed to remain as, or become, a dwelling or a number of dwellings. That contention was rejected by the Birmingham VAT and Duties Tribunal, and the commissioners appealed.
Before the High Court, the company submitted that any building that fell within the curtilage of a listed building and had a domestic use qualified as a protected building. The company relied, inter alia, upon section 6 of the Interpretation Act 1978, whereby the singular (“a building”) was to include the plural (“buildings”) subject to any contrary indication in the relevant statute.
Held: The commissioners’ appeal was allowed.
1. There were sufficient contrary indications in the 1994 Act to preclude reliance upon the Interpretation Act, notably: the various instances where the draftsman had, presumably for clarification, expressly referred to the plural; the conditions that had to be met before a garage could be included in the relevant building (Note 2 to Group 5); and the requirement that each dwelling had to consist of self-contained living accommodation (Note 2 to Group 6). Moreover, regardless of whether the social purpose of Group 6 was the alleviation of the financial burden on the owners of listed buildings or the encouragement of home ownership, the mere identification of the purpose did not assist in identifying precisely how far the relief was intended to extend. It was accordingly impossible to assume intuitively that the draftsman wished to include a secondary building (which might have no architectural or historic interest of any kind) where that building did not itself comprise self-contained living accommodation.
2. Further, and critically, achievement of the social purpose of the legislation had to be seen in the context of the principle, consistently applied by the European Court of Justice, that zero-rating (or other forms of exemption) should be a limited exception to the general rule that all supplies for consideration by a taxable person should give rise to VAT or turnover tax. The provisions of Group 6 accordingly fell to be construed in the narrow fashion urged by the commissioners: Commission of the European Communities v United Kingdom Case 416/85 [1990] 2 QB 130, Stichting Uitvoering Financiele Acties v Staatssecretaris van Financien Case 348/87 [1989] ECR 1737 and Institute of the Motor Industry v Customs & Excise Commissioners Case C-149/97 [1998] ECR I-7053 considered.
Paul Harris (instructed by the solicitor to the Commissioners of Customs & Excise) appeared for the appellants; Philip Brunt (instructed by Francis Clarke, chartered accountants) appeared for the respondent.
Alan Cooklin, barrister
