[2010] UKFTT 421 (TC)

TC00695
	Appeal number:  TC/10/01084

Appeal against refusal of claim for refund of VAT under DIY Builder Scheme; 13 amp heat storage Aga; whether “electrical appliance” “designed to heat space” under Schedule 8 Group 5 Note 22; Appeal Refused.

FIRST-TIER TRIBUNAL

VALUE ADDED TAX 

	MR RICHARD SIDGWICK	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (VAT)	Respondents

TRIBUNAL JUDGE:	Mrs G Pritchard, BL., MBA., WS
Member:			Mrs Charlotte Barbour, CA., ATII

Sitting in public at 126 George Street, Edinburgh on Monday 9 August 2010

Mr Richard Sidgwick for the Appellant

Mr Bernard Haley, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

Background
1.	This is an appeal against a refusal of a refund of VAT on a 13 amp heat storage Aga incorporated into a new home for the Appellant and built under the DIY Builders Scheme.  
2.	A refund was claimed under Section 35(1), (1A) and (1B) of the Value Added Tax Act 1994.  There was no dispute about Section 35(1) or (1A).  The disputed matter was the interpretation of (1B) when read in conjunction with Schedule 8 Group 5 Note 22.  
The Law
3.	Section 35 (1B) states:  "For the purposes of this section goods shall be treated as used for the purposes of works to which this section applies by the person carrying out the works insofar only as they are building materials which in the course of the works, are incorporated in the building in question or on its site”.  
For the purposes of interpreting what are building materials the Value Added Tax Act 1994 provides at Schedule 8 Group 5 – Construction of Building etc notes, which at Note 22 provides as follows:
22 “Building materials”, in relation to any description of building means goods of a description ordinarily incorporated by builders in a building of that description, (or its site), but does not include – 
(a) ………………………………………
(b) ………………………………………
(c) electrical or gas appliances unless the appliance is an appliance which is – 
(i) designed to heat space or water (or both) or to provide ventilation, air cooling, air purification or dust extraction; or 
(ii) ………………………………………………
The Evidence
4.	The Appellant appeared and gave evidence and was credible.  He also produced a bundle of written material which is marked as the Appellant’s Bundle A.
5.	Most of the material contained in the Appellant’s Bundle is also contained within the Bundle prepared by HMRC.  Where reference is made to any page or to any document the reference will be to material in HMRC’s Bundle and will be treated as repeated here.

6.	HMRC did not bring anyone to give evidence.  In light of how the Tribunal proceeded it was unfortunate since on the morning of the Hearing a case was produced for the first time to which Mr Haley made reference namely Richard Cusdin v HMRC MAN/05/758 (Cusdin).  There was no evidence as to whether or not the officer concerned knew of the decision or could have advised the Appellant of the decision earlier.  
Submission by HMRC
7.	Mr Haley on behalf of HMRC and with consent submitted first.  He said that the Aga under dispute was plainly and simply an electric cooker and as such was excluded from entitlement of a VAT refund in terms of Note 22.  He accepted that it met all the distinctions in Sections 35(1) and (1A) but was excluded as stated above.  He founded on Cusdin v HMRC.  That case involved a gas fired Aga.  There is contained within the Decision a description of the Aga which was designed for continuous use.  Many aspects of that Aga accorded with the electric fired Aga under dispute.
Submission by the Appellant
8.	The Appellant, like Mr Cusdin had also designed his house without additional heating in his kitchen, using the 13 amp heat storage Aga as the source of heating for the kitchen.  In the information which was provided by the Appellant and which can be found at page 7 of HMRC’s Bundle a full description of the 13 amp heat storage Aga will be found.  The Appellant after giving his evidence and relying on the material submitted, said that he considered he did come within the statute provisions as his Aga was specifically a heat storage Aga which provided continuous heat day and night whether cooking was taking place or not.  He required no additional supporting heating in his kitchen and his central heating system did not extend there as the Aga heated the kitchen.  
Findings-in-Fact
9.	From the evidence we find the following facts:
(1)	the Appellant was supplied with and paid for a 13 amp heat storage Aga in the sum of £6,572.77 with VAT of £1,145.28.
(2)	He was entitled in terms of VATA 1994 Section 35(1) to make a claim for a refund of the VAT paid.
(3)	The particular Aga installed for the Appellant according to its description at page 7 of HMRC’s Bundle is specifically described.  It is a new development of the Aga and is controlled by an electronic system referred to as “AIMS”.
(4)	It is not switched on to cook or off when cooking ceases.  Its primary purpose is to provide cooking facilities on hot plates and with a series of ovens but it also has an incidental effect of providing a continuous heat source which heats the room in which the Aga is situated.  
(5)	Aga has come under criticism recently for not being energy efficient and in a bid to overcome the adverse claims, explain in their paperwork at page 58 of HMRC’s Bundle that there are energy offsetting aspects of this particular Aga.  They point out that a very important saving comes from the reduced need for supplementary heating in the kitchen possibly avoiding the use of one or two radiators.  They also state that most Aga owners find that they have no requirement for the use of various additional appliances but in particular a reduced need to operate a tumble dryer or electric clothes airer.  In addition they also make conventional cookers not designed as a heat storage facility as they have instant gas hob burners with switches which turn gas on and off and do not heat hotplates.  
(6)	However, despite these claims we also find the Aga which is the subject of this dispute is designed to cook food.  Indeed it is heavily insulated.  Despite its claims about reduced requirements for tumble dryers that is also true of any cooker if run continuously in any home.  It is not designed for heating.
The Case Law
10.	Reference was made to the case of Cusdin where Chairman Michael Johnson and his colleague decided that the Aga in question was not “designed” as a space heating piece of equipment.  We agree with this judgment.  It is not in our view relevant how the Aga is ignited or started or controlled with an electronic system.  (The AIMS control method previously referred to above).
Decision
11.	In all the circumstances we were not satisfied the Appellant’s claim should succeed.  We therefore refuse the Appeal.
Reasons
12.	We had some sympathy for the Appellant who sincerely believed his cooker came within the provisions of the legislation.  However, the question the Tribunal must address is what is intended to be within the description “Building Materials”.  The man in the street might start with bricks and mortar if asked.  He might even get a hot water system.  But a cooker is a fixture or fitting, halfway between building materials and furniture and furnishings – quite clearly left out of Note 22.
13.	Kitchen fittings are clearly excluded in every respect.  So must the Appellant’s Aga be excluded.  We accept it does incidentally heat the kitchen but it is not designed for that.  That is an incidental consequence of the cooker being on all day/and/or night.  That is true of every cooker.  Therefore we refused the appeal.
14.	No expenses are found due to or by either party.
15.	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.

MRS G PRITCHARD, BL., MBA., WS
TRIBUNAL JUDGE

RELEASE DATE:    8 SEPTEMBER 2010