[2011] UKFTT 297 (TC)

TC01159

Appeal number TC/2010/07091 

VALUE ADDED TAX – Application for an extension of time for appealing an assessment – exceptionally granted – whether attribution by HMRC of 25% of works carried out to a house as repairs or maintenance to preclude zero-rating treatment under Group 6, Schedule 8, VATA was unreasonable or wrong – held it was not – whether the construction of a separate building as a garage/study attracted zero-rated treatment under the same Group – whether the construction of a wall was an approved alteration to a protected building – appeal adjourned for further evidence – appeal dismissed in part

FIRST-TIER TRIBUNAL
TAX CHAMBER

	TPH DEVELOPMENTS LTD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

				TRIBUNAL: 	JOHN WALTERS QC

						
Sitting in public in Norwich on 13 April 2011

G.P. Hewson and Timothy Perry, Director,  for the Appellant
P. Rowe, Senior Officer of HMRC, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.	TPH Developments Ltd. (“the Appellant”) appeals against an assessment to value added tax (“VAT”) for the periods 01/04, in the amount of £1205.23, 04/04, in the amount of £4170.21 and 10/05, in the amount of £383.90.  These assessments relate to work carried out by the Appellant for Mr. Hewson (who also appeared) as client.
2.	The assessed amount for the period 01/04 (£1205.23) relates to VAT on an amount of 25% of the payments received by the Appellant in respect of work at Old Nursery Farm, a listed building.  The amount of 25% is the amount of the total payments which the Respondent Commissioners (“HMRC”) have estimated as attributable to works of repair and maintenance at Old Nursery Farm.  Old Nursery Farm is a listed building and the balance of 75% is accepted by HMRC to relate to alterations eligible for zero-rating under Group 6 of Schedule 8 to the VAT Act 1994 (“VATA”).  Works of repair and maintenance are specifically excluded from these zero-rating provisions by Note (6) to Group 6.
3.	The assessed amount for the period 04/04 (£4170.21) relates to VAT at the full standard rate on payments received by the Appellant in respect of the construction of a building separate from, but in the curtilage of, Old Nursery Farm, which was designed for use as a garage and a study.  
4.	The assessed amount for the period 10/05 (£383.90) relates to VAT at the reduced rate of 5% (see: VATA, Schedule 7A, Group 6, item 1) on the construction of a wall abutting Walnut Tree Barn, which is also, according to the Appellant, a listed building.
5.	The notice of appeal in this matter is dated 30 August 2010.  The assessment was apparently issued before 29th March 2007, which was the date when a letter was received by HMRC from the Appellant requesting that the assessment be reconsidered within HMRC.  On 4 June 2007, HMRC (by Mrs. E. Foster, Review Officer) wrote to the Appellant giving the result of reconsideration of the part of the assessment which related to the construction of the garage/study.  That result was to confirm the assessment.  It contained, as a final paragraph, the following text: “If you wish to appeal to a VAT & Duties Tribunal against the decision, you will need to apply to the Tribunal for an extension of time in which to lodge the appeal”.
6.	The Appellant maintains that he did not receive the letter dated 4 June 2007 and delayed lodging the Notice of Appeal because he did not receive from HMRC the necessary papers to enable him to do so, which he was expecting to receive from HMRC.  I was taken to a record of log entries kept by HMRC which showed that there were telephone calls and attempts to communicate by telephone between Mr. Timothy Perry (director of the Appellant) and HMRC in which HMRC notes that the tribunal forms have not been completed.  Mr. Perry told me that he was throughout intending to appeal the assessment and had made this known repeatedly to HMRC but that the notice of appeal form was never filled in because he was never sent a copy to be filled in – which is what he expected would happen.
7.	HMRC asked for the appeal to be struck out not only because the notice of appeal was lodged over 3 years out of time but also because it appeared that the Appellant’s main complaint was that it had been misdirected by HMRC as to the VAT liabilities of the works in issue when application had been made to HMRC for guidance.
8.	I was sympathetic to the Appellant’s point that the delay in making the appeal had been occasioned by his not having received the letter from HMRC dated 4 June 2007 and a persistent misunderstanding on the Appellant’s part as to the appropriate steps required to be taken to initiate a VAT appeal.  I was not satisfied that these factors were entirely the Appellant’s own fault and that mistakes on the part of HMRC had not contributed to them.  I therefore, exceptionally, allowed the Appellant’s application to bring the appeal out of time and directed that the time for lodging the notice of appeal be extended to the extent necessary to deem the Notice of Appeal dated 30 August 2010 to have been lodged in time.
9.	HMRC took the point that the Appellant ‘in essence has a complaint relating to alleged maladministration rather than grounds of appeal’ and asked that the appeal be struck out also for lack of jurisdiction in the Tribunal to deal with that point.
10.	There is currently some uncertainty as to the extent to which public law points of this kind can be taken in an appeal before this Tribunal.  At the hearing I refused to consider the Appellant’s point on alleged maladministration because it appeared to me to be outside the Tribunal’s jurisdiction.  However, I did direct that HMRC must provide to the Appellant (Mr. Hewson consenting) a copy of their transcript or note of the discussions that took place in 2003 between Mr. Hewson (in Mr. Perry’s presence) and HMRC relating to the construction of the garage/study – see: below.  On further consideration, I have decided to reserve the issue of whether the Appellant can rely on alleged maladministration in this aspect of the appeal.  
11.	Turning to the substance of the appeal, as indicated in paragraph 2 above, the Appellant has not discharged the burden on him of showing that the apportionment of 25% of the consideration received for works carried out at Old Nursery Farm to works of repair and maintenance was unreasonable or incorrect.  Accordingly the assessment must stand so far as the amount assessed for the period 01/04 is concerned.
12.	Likewise, the assessment insofar as it relates to the construction of the garage/study is correct as a matter of VAT law.  The works do not qualify to be charged at the reduced rate of 5% pursuant to Schedule 7A, Group 6, item 1 of VATA because they were not supplied in the course of a qualifying conversion.  The only relevant qualifying conversion was the conversion of the two barns, Walnut Tree Barn and Apple Tree Barn (Barns ‘A’ and ‘B’ on the plan which I was shown) into dwellings.  But the garage can apparently only legally (pursuant to the relevant listed buildings consent) be occupied for purposes incidental to the residential use of Old Nursery Farmhouse.  This excludes the works from being supplied in the course of a qualifying conversion.  
13.	Zero-rating under Group 6 of Schedule 8 to VATA is also excluded, this time because of the application of Note (10), which renders the construction of a building separate from but in the curtilage of a protected building incapable of constituting an alteration of the protected building.  It is only if the works of construction of the garage/study had constituted an approved alteration of a protected building that zero-rating might have applied as a matter of VAT law (pursuant to item 2, Group 6, Schedule 8, VATA).
14.	However, I reserve my decision on whether the assessment must stand also so far as the amount assessed for the period 04/04 is concerned, pending further consideration of the issue of whether the Appellant can rely on alleged maladministration in this aspect of the appeal. Even if I decide that I have jurisdiction to consider this public law point, I would only allow the appeal on this aspect if I were persuaded that there was evidence sufficient to establish a legitimate expectation on the part of the Appellant that the then intended works would attract any VAT consequences other than those attributable to them by the relevant VAT law construed in the normal way.  I therefore make no decision on the appeal in relation to the assessed amount for the period 04/04 (£4170.21) at this stage, but I also direct HMRC to file further written submissions on these issues as will be seen below. 
15.	Finally, in relation to the construction of the wall abutting Walnut Tree Barn, the Appellant seeks zero-rating for the works concerned (which HMRC already accept are subject to the reduced rate of 5% - see above).  The case for zero-rating these works is that the construction of the wall is an approved alteration of Walnut Tree Barn, a protected building.
16.	In correspondence (a letter dated 9 October 2006 to the Appellant), HMRC (by Officer Mr. D. McKie) rejected this case on the grounds that ‘the construction of, or work to, a wall does not qualify as an approved alteration as the works are not to the fabric of a protected building and can be identified as a separate structure’.
17.	The relevant definition of an ‘approved alteration’ is: “works of alteration which may not … be carried out unless authorised under [the Listed Buildings legislation] and for which … consent has been obtained under [such legislation] but does not include any works of repair or maintenance of and incidental alteration to the fabric of a building which results from the carrying out of repairs, or maintenance work” (Note (6), Group 6, Schedule 8, VATA).
18.	It is not clear to me that the construction of the wall was not an approved alteration of Willow Tree Barn, but I was unable to investigate the matter any further because the listed building consent for the construction of the wall was not available at the hearing.
19.	I therefore adjourned the hearing of the appeal and made directions (1), (2) and (3) at that time.  I add directions (4) and (5) at the stage of releasing this Decision.
DIRECTIONS
1.	The Appellant must send to Officer Rowe (at HMRC Appeals and Reviews, Room 116, New Wing, Somerset House, Strand, London. WC2R 1LB) to be received by him before close of business on 26 April 2011, a copy of the listed buildings consent showing that the construction of the wall attached to Walnut Tree Barn (Barn ‘A’) (with gate) is a work of alteration to a protected building (viz: Walnut Tree Barn) which required listed buildings consent to make its construction lawful.
2.	HMRC must inform the Tribunal and the Appellant in writing before close of business on 10 May 2011 whether they propose to continue to dispute zero-rating treatment for the construction of the wall, and, if so, give the grounds relied on.
3.	Before close of business on 10 May 2011, HMRC must provide to the Appellant (Mr. Hewson consenting) a copy of their transcript or note of the discussions that took place in 2003 between Mr. Hewson (in the Appellant’s presence) and HMRC relating to the construction of the garage/study.
4.	Before close of business on 31 May 2011, HMRC must serve on the Appellant and lodge with the Tribunal a skeleton argument dealing with the jurisdiction of the Tribunal to consider a public law issues of the type raised by the Appellant in this appeal, in the light of the decision of Sales J in Oxfam v HMRC [2010] STC 686 and the subsequent First-tier Tribunal Decisions in CGI Group (Europe) Ltd.  [2010] STFD 1001 and Hanover Company services Ltd. [2010] SFTD 1047.  The skeleton argument should also address the issue of whether the discussions that took place in 2003 (see: direction (3)) provide evidence sufficient to establish a legitimate expectation on the part of the Appellant that the then intended works in relation to the garage/study would attract any VAT consequences other than those attributable to them by the relevant VAT law construed in the normal way.  
5.	The parties are to be at liberty to apply to relist the appeal on or before 30 June 2011 if no agreement is reached by then regarding the outstanding issues in the appeal. If such agreement is reached, the Tribunal must be informed of it as soon as possible, and in any event before 1 July 2011.
20. The appeal is therefore dismissed in part (see: above in relation to the works of repair and maintenance to Old Nursery Farm) and is adjourned in relation to the remaining items – the construction of the garage/study and the wall.
Right to apply for permission to appeal
21.	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.

JOHN WALTERS QC
JUDGE OF THE FIRST-TIER TRIBUNAL
RELEASE DATE: 6 May 2011

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