[2010] UKFTT 633 (TC)

TC00872

Reference no:  TC/2010/01021

Value Added Tax  -  "Self-builder's" claim to recover VAT in respect of building costs of a new dwelling-house – whether requirement to leave two walls of previous building standing were a condition of the planning consent  -  whether the location of the new building constituted a "corner site"  -  Appeal dismissed

FIRST-TIER TRIBUNAL
TAX CHAMBER

	MARTIN SAMUEL	Appellant

	- and -

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

			TRIBUNAL: 	 HOWARD M NOWLAN (Judge)
					 ANDREW PERRIN, FCA	 

Sitting in public at 45 Bedford Square, London on 4 November 2010

The Appellant in person

Rory Dunlop, counsel, on behalf of the Respondents

© CROWN COPYRIGHT 2010

DECISION

Introduction

1.     This was a VAT case where the Appellant was appealing against the decision, and the further decision on review, to reject his claim for a refund of £25,084.20, being the VAT charged in respect of supplies made to him in the course of his construction of what he claimed to be a "new dwelling-house".

2.     We have felt compelled to dismiss this Appeal, albeit with very great misgivings.   This will be a great disappointment to the Appellant who will, we imagine, consider that the combined effect of the planning permission that he obtained, and of this VAT decision, is unjust and contrary to common sense.

3.      We might add that, whilst this is of relatively little significance, we are also disappointed to have to give this decision.  Our prime duty is to reach the right technical conclusion and we believe that we have done that, but it is also more appealing to feel that that decision accords with common sense and produces a just result.   We feel that this decision achieves neither of those further points, and at the end of it, we include a plea that those responsible for this case within HMRC might reconsider their decision and concede the relief claimed, for reasons that we will summarise.

The facts

4.    The Appellant purchased a stud farm at Wantage in Oxfordshire.   We were not concerned with the full extent of the property, though it was clear that in addition to the dwelling-house on the site, with which we are concerned, there were various stable buildings, and many surrounding acres, doubtless to be used in exercising the horses. 

5.     The dwelling-house was a very unimaginative, relatively modern, and probably fairly poorly built bungalow.  We were told that it was built of unattractive bricks, and we could see from excellent photographs that its windows were as boring as its whole appearance. 

6.     The Appellant wanted to knock down this small bungalow, and build instead the house that has indeed now been built that can fairly be described as a fine, very substantial house, being vastly larger than the previous house.  The new house seems to be a clever combination of single and two-storey construction.  It is obvious that the bricks and tiles are attractive and of good quality.  There is also an attached quadruple garage, all built of the same materials, and with a pitched roof matching the various roofs of the house itself. 

The relevant VAT law in this case

7.      It will be clearest to summarise the VAT test that the Appellant must satisfy in order to sustain his claim for recovery of VAT before giving the relevant facts in relation to the terms of the Appellant's planning consent, and the various discussions in relation to the VAT treatment of the construction of the house. 

8.    The Appellant made a claim for the recovery of VAT charged in respect of supplies of materials and services that he had acquired and obtained in the construction of what he claimed was a new dwelling-house.    It was common ground between the parties that the Appellant satisfied all the other requirements to sustain his VAT reclaim, save for the fact that the Appellant needed to demonstrate, in terms of Note 18 to Group 5 of Schedule 8 to the VAT Act 1994, that the pre-existing house on the site had ceased, prior to the new construction, to fall within the definition of "an existing building".  Note 18 provides as follows:-

"A building only ceases to be an existing building when:

(a) demolished completely to ground level; or

(b) the part remaining above ground level consists of no more than a single façade or where a corner site, a double façade, the retention of which is a condition or requirement of statutory planning consent or similar permission." 

The facts in relation to the planning application, and consent

9.      Most of the cases involving a dispute about a VAT reclaim in circumstances where the planners have required some part of a previous building to be retained relate to the retention of some part of a listed building, or the retention of a façade where, say, the façade might be a fine Georgian façade that understandably needs to be preserved. 

10.     In this case, the facts were almost the reverse of those normal facts.   In this case, it appears that on account of some extraordinary quirk of planning law, the local planning authority considered that local planning policies meant that consent for the Appellant's application could only be given if it was framed as an application for an extension of the existing building, rather than as an application for a new building following the total demolition of the previous house.   It appears that the planners would have been perfectly happy to grant permission for a new building, following the total demolition of the previous house, but that in that situation the new house would have had to be much smaller than the one that the Appellant wished to build because of the policies applying to new buildings in the area.   Quite why the local policies enabled the local authority to grant permission for an extension of the existing house, so as to create a house of the size that the Appellant wished to build, we do not know, but that, oddly, was the position.    
11.     Whilst this distinction between the size of the eventual building that could result from an extension, as distinct from a new build, is very odd, we imagine that the local authority was being constructive at all stages.  They acknowledged that the proposed new house was going to be a vast improvement over the previous one, and they wished to give permission for the project. Accordingly it appears that they indicated that the Planning Officers would support the application, provided that it was framed as one involving an extension of the existing building.  And in order to satisfy that requirement for planning purposes, it appears that some part of the existing house would have to be left standing.  The Planning Officers had plainly made it clear to the Appellant that what in detail had to be retained were two joining walls to the back and side of the previous house, referred to as the North and East walls. In terms of common sense, certainly the Appellant, and doubtless the Planning Officers as well, realised that whilst this technicality enabled the Appellant to build the house he wished to build, in all other respects, the requirement to retain the two existing walls was a complete nonsense.  Retaining them made the new build more difficult and costly.  It has also resulted in a very small part of the exterior walls of the new house being built of different and inferior bricks to those used in the rest of the new house. The retained walls also had to be strengthened in order to bear the increased weight of the new house, and during construction, the walls had to be supported to stop them falling down. 

12.     During the planning debate in the Committee, one minute records a discussion raised by one member as to whether the proposal complied with the policies.  It reads:

"One Member, although welcoming the design of the proposed extension, expressed concern that the size might be contrary to policy.    In response, the Development Control Manager understood this concern but confirmed that two principal walls of the existing dwelling would be retained and therefore the proposal did not constitute a complete rebuild."

13.     The plans submitted by the Appellant for the proposed construction indicated the ground plan for the new house.  We are not absolutely certain that the relevant plans actually indicated that the North and East walls of the previous house were to be retained, but in a much later letter of 13 November 2009, a planning officer unquestionably said that "those plans showed the North and East walls being retained", and HMRC's Skeleton Argument indicated that this sentence certainly suggested that the plans indicated which walls were to be retained.  It was in any event clearly understood that for the planning application to be valid, the project had to be framed as an extension and it was clearly understood that the retention of the North and East walls were required, and were sufficient, for this fiction to be satisfied.

14.     Consent was given for the proposed construction on 8 January 2007. The consent permitted the "Extension and Alterations to existing dwelling.   Erection of a domestic garage" all to be "carried out in accordance with the application and accompanying plans submitted by you". The Planning Consent did not refer specifically to the requirement that the North and East walls should be retained, though the final paragraph of the permission did contain the following statement:-
"Planning permission has been granted for an extension to the existing dwelling only. The applicant is advised that if the existing dwelling is demolished, planning permission would not be granted for a replacement dwelling of this size as it would be contrary to policy for replacement dwellings in this location."

15.    Following the receipt of this planning consent, the Appellant attempted, unsuccessfully, in discussions with the planning officers, to chisel away at the requirement that he should retain the two relevant walls, and he also sought to clarify that he would be entitled to a VAT refund, notwithstanding the feature that he could not demolish the pre-existing house to ground level, but had to retain the two walls described above. 
Discussions with the planning authority
16.    The Appellant's first attempt to modify the "retention" requirement demonstrates how ridiculous it was, in that he asked whether he could demolish the outer skin of brick-work of the two retained walls, so presumably leaving just the internal blockwork, and doubtless enabling all the windows to fall out.   The objective of this request was obviously to prevent the eventual house being slightly spoilt by having two small areas of its eventual brickwork in a different and inferior brick.  This request was turned down, and the Appellant was told that if he demolished the relevant outer skin, he would be treated as having demolished the previous house, and thus his whole permission would be void. 

17.     The Appellant then sought to modify the "retention requirement" by asking whether instead of retaining the North and East walls, he could retain the North and West walls.   The objective of this suggested change was that whilst the retained East wall would end up as an exterior wall of the new house, if he could instead retain the West rather than the East wall, that wall would effectively disappear because it would become an internal wall in the new house. 

18.     A planning officer responded to this request, saying that the requested change involved a materially different proposal and could not be regarded as a "minor amendment".  It was possible that if the Appellant pushed for this modification it might have been approved, but he was still advised, in view of all the difficulties about the application, not to seek to modify the requirement that the North and East walls be retained. 

19.     The Appellant accepted this recommendation, and he thus proceeded with the development with the retention of the relevant walls. 

20.    We can conveniently mention at this point that we were shown excellent photographs of the pre-existing house, the eventual fine new house, and extraordinarily stupid looking photographs of the site, with all the foundations of the new building and its concrete floor in place, with the two retained walls looking absurd.  These last photographs illustrate how unfortunate it was that the planning requirement led to the ridiculous retention of what eventually became small portions of two of the walls of the eventual house. 
The Appellant’s endeavours to confirm his entitlement to a VAT refund
21.   As we have said, the Appellant was also concerned to ensure that he would be entitled to a VAT refund, as various people had apparently indicated to him that he would be.

22.    The Appellant accordingly wrote to HMRC, clearly indicating that the planners had required him to retain two walls of the pre-existing house.  He also attached plans. 

23.    The first response from HMRC, dated 9 January 2008, explained that it was unusual for HMRC to give VAT advice to suppliers or customers, and that the most appropriate course would be for the suppliers to the Appellant to seek a ruling, making it clear which particular points were thought to occasion doubt.   We are not persuaded that this approach was appropriate since so far as the suppliers were concerned, their supplies were plainly subject to VAT and that is not the point that was in issue.   Whether the Appellant would be entitled to the recovery of VAT that he was hoping to make was not necessarily something that the suppliers would be concerned with, or indeed have the relevant facts to consider.

24.     This letter did however contain some guidance, as it included the following paragraph:-

"Naturally, I appreciate your own interest in verifying that the VAT treatment given by suppliers is correct, and, in our guidance book V1-8A, you have referred to the most comprehensive of our available published sources on the application of VAT to building and construction supplies. As stated in subparagraph 3.4.3, two connecting corner walls of the façade of an existing building may be retained without invalidating the overall construction as a new dwelling, so long as this represents the full extent of retention and is also a precondition of planning consent for the project itself.   Subparagraph 3.4.5 confirms that the retained façade does not need to be front- or street-facing".

25.     The unfortunate point about this paragraph, which was the closest the letter came to providing any assistance, was that it omitted to mention the only requirement that we now consider results in the failure of the Appellant to sustain his claim.    This requirement was the point, to which we will have to give considerable attention, namely the requirement that before the retention of two adjoining walls of a "double façade" could be disregarded in considering whether a pre-existing building had ceased to be a building, the building had to be located in a "corner site". 

26.    In a further effort to obtain prior confirmation of the entitlement to a VAT refund, the Appellant wrote a much more detailed letter in which, in an effort to demonstrate the sort of ambiguities that he though required clarification, he listed about 10 suggested doubtful points.   He made no mention of the requirement that the building had to be located on a corner site before he could disregard the required retention of two adjoining walls of a "double façade", which we find somewhat curious, but in any event, the reply also failed to address this point.   Indeed the most important paragraph of the reply concentrated again on the critical feature that the retention of the walls should be a requirement of the planning consent. 

HMRC's decision

27.     When the building had been completed, and the Appellant had made his formal claim to recover the VAT, this claim was refused in a letter of 16 October 2009.    The reasons given for the rejection were as follows:-

"You have stated in your letters that the retention of a corner façade was a condition of your planning permission but it is clear from the planning permission provided … that the Planning Authority imposed no explicit conditions at all for the retention of any façade of the original building.

A note on your planning permission states "planning permission has been granted for an extension to the existing dwelling only. The applicant is advised that if the existing dwelling is demolished, planning permission would not be granted for a replacement dwelling of the size as it would be contrary to policy for replacement dwellings in this location."

The documents supplied show that you have been in correspondence with your planning authority regarding the retention of the north and east walls but as outlined above the retention was never an explicit condition imposed on your original planning permission; therefore your claim does not meet the criteria of a new building."

28.     We might add that this letter made no reference to the feature that the building, whose double façade had been retained, had not been located in "a corner site", as any part of the reasoning for the rejection of the claim. 

29.     The Officer who made the decision referred to in paragraph 27 reviewed that decision and on 26 October 2009 he reconfirmed the decision. This was essentially on the same basis, namely that the planning consent had contained no explicit condition for the retention of the two walls.    The following paragraphs are the relevant ones:-

"Under the rules of the scheme if a façade is retained, the planning permission must contain an explicit condition or requirement if the works are to be regarded as the 'construction of a building'.    Your planning permission does not have an explicit condition requiring the retention of any façade of the building.

I have reviewed the additional documentation you have sent but there appears to be no clear confirmation from the Council as to whether the two walls are to be retained as an explicit condition of the planning permission. 
The planning officers report states 'It is proposed to maintain the existing north and east walls of the property' but that would imply that this is what you proposed to them in your planning application and not that the council required the retention of these walls."

30.     There was then a further review by a different officer, and this again confirmed for basically the same reasons that the claim was rightly rejected.

31.     We will quote below several paragraphs of the letter that seek to explain the rejection, though should perhaps first make the comment that the first three paragraphs concentrate on the point that the planning application had to be framed as one for an "extension", whereas the later paragraphs concentrate on the fact that there was no specific condition attached to the planning consent that two walls should be retained.  The relevant paragraphs were as follows:-

"From the details held, it seems that the council would not grant permission for a new build of the size proposed. This was because a replacement dwelling of this size would be contrary to the policy for replacement dwellings in your location.   This was the reasoning behind why it was eventually agreed that permission would be given for an extension and alterations to the existing dwelling only. 

The extracts clearly demonstrate that the District Council gave consent for an extension to an existing dwelling only and not permission for a new build.
Therefore your claim does not qualify as the description and nature of the build falls under the Law in the VAT Act 1994 Schedule 8 Group 5 Note (16), the details for which are as noted above.

PLANNING CONSENT CONDITION

I recognise the letters which have been exchanged between the various parties in regard to this aspect.    I note that there has been negotiation between the council and yourselves before it was decided which walls would be retained. 
Although acknowledging that a corner façade was retained, this was not an explicit condition of the planning consent.    The only stipulation the planning authority made was that the bungalow could not be completely demolished.   You had arranged with the council which walls were to be retained.

 I understand the walls to be kept were the rear and side (north and east) walls.   Agreeing to keep two walls to ensure planning permission was granted is not the same as there being an actual planning requirement to keep them. 

If walls were to be kept as a requirement of planning, then this would be stated in the permission.  Whilst an Enforcement Officer from the Vale of [White] Horse District Council did visit the site in May 2008 to verify that two walls had been retained and took photographs to prove it, again this does not categorically substantiate that these walls were a planning condition.   It is maintained that the officer attended the site to ensure that the building had not been completely demolished and took evidence of that, not that there had been retention of a corner façade."

32.    In all three of those letters, there was no remote attention given to the issue of whether the pre-existing building had been located in a corner site. 

33.     We should finally add, before dealing with contentions and our decision, that HMRC's Statement of Case did raise two grounds for the rejection of the claim.   The first was that the pre-existing building had not been located in a corner site but the new building "involved construction of a detached property sited away from the public highway."  Thereafter the Case emphasised that there had been no explicit condition in the planning consent for the retention of the two walls, and it said that because the terms of the Planning Consent were clear and unambiguous, it was not possible to look to the surrounding agreements and understandings in order to construe that Consent.     

34.     In HMRC's counsel's Skeleton Argument, no actual attention was given to the repeated reference to the "corner site" point because it was contended that HMRC's arguments about the absence of "explicit conditions" were themselves sufficient to dispose of the case. 

Our decision

35.     The Appellant can only succeed in this appeal if he has demonstrated both that the retention of the facades of the old house that were left standing were retained pursuant to "a condition or requirement of statutory planning permission", and secondly because he retained a double façade, he needs also to show that the building was located in a "corner site".   Since moreover, the first question might be answered in a different manner, according to whether or not we are satisfied that the plans, in accordance with which he was required to conduct the development, specified that the North and East walls of the old house were to be retained, even the first point must be considered on two different bases. 

Was the retention of the North and East walls a condition of the statutory planning consent if the plans submitted with the application indicated that the two relevant walls were to be retained?
36.     We deal first with the issue of whether the planning permission contained a condition that the North and East walls should be retained, and deal with this first on the assumption that the relevant plans did indicate that the two walls should be retained.   As we have indicated in paragraph 13 above, a planning officer did indicate that the plans indicated that these walls were to be retained, but we are not certain that this was correct.

37.     Counsel for HMRC placed great emphasis on the proposition that the planning consent needed to contain an "explicit condition" that the relevant walls should be retained. We are not entirely clear whether this contention extended to the proposition that there would be no such explicit condition if the consent required the building to be constructed in accordance with the plans (as it did), and the plans indicated that the two walls should be retained.   If, however, the contention was that extreme we reject it.   

38.     There is no requirement that the condition be "explicit".   There must simply be a condition or requirement that the walls be retained.    In this context, we believe that the notion of a "condition or requirement" is any term of the planning consent, compliance with which is required in order for the development to comply with the provisions of the planning consent, and to be lawful.   In this case, if the indication of the Planning Officer in the 2009 letter is right to indicate that the plans did indicate that the North and East walls were to be retained, then since the consent required the development to be conducted in accordance with the plans, we decide without hesitation that the retention of the two walls was effected pursuant to a required condition.     

39.     We actually believe that the Planning Officer was instrumental in indicating that it was the North and East walls that should be retained.   Even however if it had been the Appellant who had reluctantly volunteered that these two walls should be retained prior to the giving of the planning consent, and if it was thus the Appellant who had indicated the retention of the walls on the plans submitted, when the Planning Consent required the works to be undertaken “in accordance with the application and accompanying plans submitted by you”, it thereby became a condition of the construction of the new house under the relevant planning consent that the walls be retained.   As the planners said on more than one occasion, if the walls had not been retained, the consent would have been void, the construction of the proposed house would have been unlawful, and all this would have been because a condition of the planning consent had been breached. 

Was the retention of the walls a condition of the planning consent, even if the plans had not indicated that the relevant walls should be retained?
40.     Assuming the reverse now, namely that the plans were silent as to whether the relevant walls were to be retained, HMRC's counsel's main argument was then that planning permissions had to be construed in accordance with just their terms, and not in the context of other recorded discussions and remarks in Committee, unless at least the planning permission was ambiguous.  We agree with this proposition.   It was then argued, however, as indeed it had been suggested by HMRC in earlier correspondence with the Appellant, that the planning permission was clear and not ambiguous, and that because the planning permission had omitted to refer specifically to the critical need to retain the relevant walls, two consequences followed.  The first was that, whilst he may not have appreciated this, the Appellant could in fact have demolished the relevant walls, or at least some or one of them, without being in breach of the planning permission.  And secondly, because the retention requirement had been omitted from the planning permission itself, the VAT test with which we are now concerned would inevitably not be satisfied, so that the Appellant would not be entitled to recover the claimed VAT.

41.     We actually find it somewhat disappointing that the HMRC officers sought to deny the VAT refund on the basis of the contention just canvassed, because the most that could have been said in this case is that through bad drafting, the planning permission might have omitted to impose a condition that was fundamentally meant to apply in this case.   It was not just on a whim that the Appellant was intended to retain the two relevant walls.  It is actually clear that it was critical to the local planning authority that the walls be retained, and that it was this feature that would sustain the critical point that the proposed works could somewhat fictitiously be classed as “an extension”.   

42.     The technical question for us, nevertheless, is whether the planning consent was clear and unambiguous.  The terms of the consent made it clear that the development in question had to be undertaken as an extension of the earlier house, and they also required there to be no demolition of the existing house.   We again have no hesitation in saying that these two requirements were far from clear, and were ambiguous.    If a third party had purchased the site, with the benefit of the planning consent, and with no knowledge of surrounding discussions, the new owner would have been in total doubt as to what particular conduct of the development would ensure compliance with the two relevant conditions.  We also consider that if such a new owner was shown the excellent photograph of just the two small walls standing, with the whole of the site of the new building being covered with concrete, and asked whether he considered that it was clear that that operation would have ranked as the "construction of an extension to the pre-existing house", he would have considered such a proposition as both extraordinarily tenuous and indeed ridiculous.   Particularly as the relevant condition about building an extension and not demolishing the existing house was accompanied by an indication that any breach of these related conditions would result in the consent being void, we consider that the third party buyer would unquestionably have felt it essential to clarify with the planning authority these ambiguous requirements, and ascertain what degree of retention would result in the requirements being satisfied. 

43.     Two further points further confirm us in the conclusion given in the previous paragraph.    Firstly, the actual discussions between the Appellant before and after the granting of the consent, and the record of the discussions in the Planning Committee both illustrate that in the local authority's view, something very specific was required in order to ensure compliance with the vital "extension and no demolition" requirement.  In other words the North and East walls had to be retained.   The local authority would certainly have confirmed that the retention of the two specified walls was what, in detail, was required to ensure compliance with the critical ambiguous term.   To assert that this meaning could clearly be derived from the wording of the planning permission itself is unsustainable.

44.     The second point that confirms us in the view given in paragraph 42 above is that HMRC indeed went the further step, implicitly required by their basic argument, and said that because the specific "two wall" condition had been omitted from the planning consent, the Appellant could have ignored the requirement to retain the two walls.   He could have taken the robust view that even if he had demolished much more of the old house (perhaps leaving one pillar to the side of some old double doors standing) and the planning authority had prohibited the construction of the new house because they asserted that the condition of the consent had not been complied with, he could have litigated the point, and established that the clear meaning of the consent was that it was in order for just one pillar to be left standing.  We consider that beyond the fact that it would been unthinkable for any owner of the site to take this risk and this attitude, had some new owner been stupid enough to do so, he would have been shown to be wrong.   In other words any court would have said that it was not clear that the “extension and no demolition” requirement would have been satisfied by merely retaining one pillar of the old house, and that thus it was appropriate to look to the surrounding agreement, and the discussion in the Planning Committee to ascertain what element of retention would satisfy the critical, but ambiguous, requirement.  

 45.     We accordingly decide that even if the plans had not inserted the requirement that the two walls should be retained, the same result arises because the critical condition concerning the requirement to extend and not demolish was ambiguous.    And in clarifying that ambiguity we look to the record of the discussion in the Planning Committee and to the clear understanding between the planners and the Appellant prior to the grant of the consent, and these discussions all indicate that the practical requirement to ensure compliance with the general and ambiguous condition was that the North and East walls should be retained. 
 
46.    We thus decide that on all the points that HMRC had raised prior to the preparation for this hearing, the Appellant was correct.   In other words the walls that were retained were indeed retained in accordance with “the condition or requirement of a statutory planning consent”. 

Was the building in question “a corner site”?

47.     We must now turn to the other requirement that the Appellant must satisfy, which was only first raised, and then without elaboration, in HMRC's Statement of Case for this hearing.  This was the requirement that because two walls were retained, the Appellant had to show that the building was in a corner site, because it is only then that two walls of the old house (or “a double façade”), rather than just one façade, could be retained. 

48.    There was considerable discussion during the hearing as to whether the reference in Note 18 (b) to "a corner site" was a reference to the retained walls simply being in the corner of the old house, or whether the old house itself needed to have been located in a corner site, such as at the junction of roads, or at the end of a terrace of houses. 

49.     There are some odd features to the Note 18 (b) requirements.  It is fairly obvious that the scenario contemplated by the draftsman of Note 18(b) was that planners would generally only require the retention of a pre-existing façade if the old building was of architectural merit.   This, however, is not stated in the requirement, and it is clear that if a façade or a double façade is required to be retained under the planning conditions for some quite different reason, Note 18(b) can still apply.   It is also clear that if the requirement had been to retain just one facade, and one façade had been retained, it would not have mattered where the building was.  In other words it could have been completely hidden from view by everyone, but the required retention of the one façade would still have satisfied the Note 18(b) requirement. 

50.     Where a “double façade” is required to be retained, however, the Note 18(b) requirement is satisfied only if the "corner site" requirement is satisfied, and we must decide what that requirement means. 

51.     The Appellant advanced the argument that the reference to a "corner site" was simply a reference to the two walls being at the corner of the building, regardless of where the building was located.  In reply, HMRC's counsel said that the implicit requirement that two walls had to join at the corner was achieved by the reference to a "double façade", whilst the "corner site" requirement required that the building be located at the corner of a road, or in some other location that could sensibly be said to satisfy the “corner site” requirement. 

52.     We consider that the treatment that the Appellant has suffered so far in this case has been most unfortunate and unfair.   In deciding whether we should reach some curious interpretation of the "corner site" requirement, and thereby give a suspect decision, we clearly conclude that three wrongs would hardly make a right, and that we must arrive at a sensible construction of the "corner site" requirement.  And regrettably, this means that we must accept HMRC's contentions on this point.  Note 18(b) is oddly drafted, we admit, because it refers only to the building, and it then says "where a corner site" as if it was the building that was the corner site.   Note 18(b) fails to use the clearer phrase of ",where located at a corner site,". That, however, must be what the requirement means.   The draftsman may have inserted the single wall requirement without reference to where the building was located, and it is a bit odd that it is only in the case of the retention of a double facade that the location requirement is specified. Reverting however to the plain common sense of the situation, the whole Note 18(b) requirement is essentially designed to deal with the retention of fine Georgian facades etc, and in that context, it must make sense that the corner site requirement is intended to require the building to be located in some visible corner site location before the compulsory retention of a double façade will not undermine the entitlement to recover VAT.

53.     The Appellant had had little opportunity to raise arguments in relation to the corner site requirement, though we did broadly understand that the site of the old and new buildings was in the midst of the countryside, and hardly in a location that could be described as "a corner site".  The Appellant indicated in outline, without giving clear evidence on these points, that his total land fell within two different title numbers at HM Land Registry, and that the house, and the corner walls in question, were at the corner of one of these historic separate titles.   Also we gathered that the relevant corner walls of the building might have been at the corner of the land covered by residential planning consent, with the remainder being agricultural land.    Although the Appellant was unable at the hearing to clarify this information, and there was some question as to whether we should call for more evidence, we have decided that any construction of the "corner site" requirement, based on either the title point or the residential permission point would be unsustainable.  In the context of the Note 18(b) test and its attention essentially to local authority requirements to retain fine facades, the "corner site" requirement must bear the meaning that HMRC contended for, and that the Appellant can regretfully not satisfy. 

54.   The consequence of this is that technically this appeal must fail and be dismissed. 

55.     We do however add a plea that those responsible for this case within HMRC should consider whether the plainly just result should not be that the Appellant's claim should be accepted.   In this context, we would hope that the reasonable discretion and latitude that HMRC has in administering the tax system might justify the refund of the claimed VAT.

56.     The reasons why we advance this somewhat unusual request are that:-

•	for anyone who has seen the photographs of the concrete site of the new building and the preservation of the two small and ridiculous bits of wall, it seems offensive to deal with this case on the basis that the new building was anything but a completely new building;
•	it is only by one extraordinary quirk of planning law that the Appellant has been put to the trouble and expense of having to retain two poor walls, that in building terms should unquestionably have been demolished;
•	HMRC challenged this case in the initial decision, a further consideration of the decision, and in an independent review, without raising the only point on which we now reach a decision in favour of HMRC;
•	we note that in the only passage of the HMRC letter of 9 January 2008 in which any actual guidance was given to the Appellant, HMRC managed to miss-quote Note 18(b) and ignore the corner site requirement that we now consider to be crucial; and
•	most vital of all, if HMRC had not omitted the reference to the corner site requirement in that letter of 9 January it is possible that, had the Appellant gone back to the local planning authority and explained that in order to preserve his deserved entitlement to a VAT refund, the local authority would need to amend the requirement and require him just to retain the North wall, it is possible that the local authority would have acceded to that request.    Since the retention of the two walls was a technical fiction to support the "enlargement" argument, and there was not the faintest merit in the walls themselves, if the local authority had been able to adopt a sensible modification to its requirement to enable the Appellant to achieve a clearly deserved result, they might have seen the sense of the request and granted it.    Since however it was only in the preparation of documentation for the hearing before us, and thus well after the building had been completed, that HMRC lighted on the significance of the corner site point, countless months after the time at which the Appellant might have been able to do something to modify the retention requirement, the Appellant never had the opportunity to try to modify those requirements.

Right of Appeal

57.     This document contains full findings of fact and the reasons for our 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.

HOWARD M NOWLAN
TRIBUNAL JUDGE

RELEASE DATE: 8 December 2010