Value added tax – Repayment – DIY builders’ and converters’ VAT Refund Scheme – Appellant commissioners refusing respondent’s claim for VAT refund on building works carried out without necessary planning permission – FTT allowing appeal after respondent obtained retrospective permission – Appellants appealing to Upper Tribunal – Whether FTT erring in law by focussing on perceived effect of backdated permission rather than time limit for submitting documentary evidence of planning permission – Appeal allowed
In May 2008, the local authority granted planning permission to the respondent and his brother for the proposed enlargement of an existing residential dwelling in a terrace in Blackburn, Lancashire. The original intention had been to extend the property into the adjoining property at the end of the terrace and then build a new property on adjacent land. However, the architect and the builder advised that both properties would need to be demolished, before replacement dwellings were constructed. The respondent was not told that he needed planning permission for the demolition of the property but building regulations consent for the work was sought and granted.
After the building work was completed, in June 2011, the respondent moved in and submitted to the appellants a claim for a refund of the VAT he had incurred on the works. That claim was rejected on the basis that the 2008 permission did not provide for the demolition of the existing dwelling and the construction of a replacement, and that the requirements of section 35 of and the notes to Group 5 of Schedule 8 to the Value Added tax Act 1994 were not satisfied. The appellants also indicated that they would not accept retrospective planning permission.
The First-tier Tribunal (FTT) allowed the respondent’s appeal against that decision after he obtained retrospective planning permission, in 2012. The tribunal concluded that retrospective permission, backdated to the date when the works commenced, had been granted by the local authority in the exercise of their powers under section 73A of the Town and Country Planning Act 1990, Accordingly, there was a planning permission covering the works in question which was in force at the time of the works. On that basis the conditions in section 35 of the 1994 Act had been satisfied and the respondent was entitled to a refund of the VAT incurred on the relevant works.
The appellants appealed contending that the FTT had erred in law in failing to take account of conditions imposed by regulation 201(b)(iv), read with regulation 201(a), of the Value Added Tax Regulations 1995 (SI 1995/2518), which required a claimant to furnish with his claim documentary evidence showing that planning permission for the building had been granted within three months of completion of the works.
Held: The appeal was allowed.
Although the FTT had referred to the requirements of regulation 201(b)(iv), it did not seem to have considered the point any further, and in particular to have addressed the question whether the production, after the expiry of the three-month time limit, of retrospective planning permission covering the work actually undertaken was sufficient to satisfy those requirements. Rather, it had focussed on what it perceived to be the effect of the backdating of the retrospective permission. The failure of the FTT to take the requirements of regulation 201(b)(iv) into account in that way was wrong. The regulation was clear; when he made his claim the claimant had to provide documentary evidence that planning permission had been granted. That could only mean the correct permission, meaning permission relating to the works actually carried out; the respondent had not been in a position to do that in 2011, since it was not until 2012 that the retrospective permission was granted. The requirements of the regulation were framed in mandatory terms and the appellants were allowed no discretion to accept something less than the prescribed documentation, nor to extend the time limit, and it was equally not open to the FTT or to the Upper Tribunal to do so. It followed that the respondent’s claim for a refund of the VAT he incurred failed.
Since the point did not arise in this case, it was not appropriate to decide whether the production, before expiry of the time limit, of permission granted in accordance with section 73A of the 1990 Act and with effect from a date before the undertaking of the work was, or was not, sufficient to satisfy the statutory requirements, in particular those imposed by section 35(1)(b) of the 1994 Act to the effect that the work should be lawful, and by note (2)(d) to Group 5 of Schedule 8, which was that “statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent”.
Edward Brown (instructed by the Solicitor to HM Revenue and Customs) appeared for the appellants; The respondent did not appear and was not represented.
Eileen O’Grady, barrister