Jacobs v Customs & Excise [2004] UKVAT V18489 (13 February 2004)

	ZERO RATING  — conversion of school into dwelling house — section 35 VAT Act 1974 — note to Group 5 Schedule 8 — was there a residential conversion— yes — appeal allowed

MANCHESTER TRIBUNAL CENTRE

 
 	
	IVOR JACOBS	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Lady Mitting (Chairman)
						Mr D Wenn	

Sitting in public in Birmingham on 21 January and 11 March 2002

Mr R Barlow of counsel for the Appellant

Ms A Graham-Wells of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	 Mr Jacobs was appealing against a decision of the Commissioners notified to him by letter dated 15 December 2000 refusing his claim for a refund of Value Added Tax.  The application for a refund was made under Section 35 Value Added Tax Act 1994 (‘The Act’), which, subject to certain conditions, permits a “do it yourself” builder to recover the VAT which he has paid out on goods used by him in the course of his building work.  It was accepted by the Commissioners that the works carried out were “lawful and otherwise than in the course or furtherance of any business” (Section 35(1)(b)).  The question for the tribunal is whether the works carried out by Mr Jacobs in his conversion of Hopwell Hall constituted a residential conversion within the meaning of Section 35.  If they do, as he contends, he is entitled to a refund of his VAT.

2.	The hearing was adjourned at the conclusion of the evidence pending the outcome of the appeal by Lady Blom-Cooper through the courts, this appeal culminating in Customs and Excise Commissioners v Blom-Cooper [2003] EWCA Civ 493.  After the oral evidence, we invited written submissions as to fact from the parties and we released our findings as to fact shortly after the conclusion of the evidence.  We then invited and received written final submissions in the light of our findings of fact and Lady Blom-Cooper.  This decision, as now released, incorporates our original findings of fact and  our conclusions and it takes into account all sets of submissions received at all times from both parties.

3.	We heard oral evidence from Mr Jacobs and from his builder, Mr Carlos Chiarella and on behalf of the Commissioners from Mrs Frances Clements, the appeals and reconsideration officer.  We also had before us an extensive bundle of documents and a number of plans relating to different periods in the history of the building.  The plans to which we were referred and those to which we ourselves refer in this decision are as follows.  Some of them were referred to so frequently throughout the course of the hearing that we identified them by number and those numbers are indicated:
(a)	1947 Hopwell Hall Special School proposed extension
(b)	February 1961 first floor plan (Scheme IV)
(c)	March 1961 site layout proposals
(d)	February 1962 ground floor plan (plan 5)
(e)	February 1962 first floor plan (plan 6)
(f)	July 1981 final plan (plan 2)
(g)	1993 the cleaner’s plan (plan 4)
(h)	March 1994 ground floor plan (plan 1)
(i)	June 1996 & April 1999 (as built revision) (plan 3)

4.	The history of Hopwell Hall, we elicited from the oral evidence and plans to be as follows.  Mr Jacobs purchased Hopwell Hall in May 1996.  He purchased it from Nottinghamshire County Council who had themselves acquired it on 27 November 1950 and until its closure on 31 August 1995 they had run it as a residential school for boys aged 10 to 16 with behavioural difficulties.  Boys would have been sent to the school after the LEA had carried out an assessment of their special needs and would remain there for up to a maximum of five years.  The school kept normal educational terms with the boys residing at the school in term time only.  Until 1986, boys had stayed in school seven days a week but after that it became a weekly boarding school with all boys going home each weekend.  Whilst the boys were in residence they would be cared for by residential childcare staff who would carry out “sleep over” duties and would on those occasions reside themselves on the school premises.

5.	When purchased by the County Council, the premises consisted of the original Hall, built it was believed in about 1900.  The Hall was built on a north-west/south east axis.  The 1947 plan shows the original Hall plus an extensive proposed extension to the south-east of the Hall.  In 1953 the County Council built a brick built extension (hereinafter referred to as ‘the extension’).  Comparison with later plans shows that the extension was built on virtually identical lines to a significant part of the 1947 proposal. This part can be identified on plan 2, marked “G F Dine” and “1950 Trad – first floor dorms.”

6.	The 1947 plan showed a proposed link between the Hall and the extension.  For evidence as to whether this link was ever built we refer to a set of undated photographs. One photograph shows the Hall and the south-east elevation of the extension.  This elevation is identical in design to that shown on the 1947 plan which we take as further evidence that the extension was based on that plan.  It is impossible from this photograph to see between the two buildings but other photographs clearly show the beginning of what can only be the linking corridor shown on the plan, so similar is it in design – a single story with the first window in identical position.  We find therefore that when the extension was built it was connected by a linking corridor to the Hall.

7.	In 1957 the original Hall was burned down and was later replaced by a two-storey C.L.A.S.P building (hereinafter referred to as ‘the CLASP building’).  CLASP buildings are of steel structure, built on a concrete slab with no proper foundations.  They bolt into each other and into adjoining buildings.  The initials stand for Consortium Local Authorities Special Projects.

8.	The CLASP building was in an L shape running to the south-west of the extension and linked into it.  A further and much smaller CLASP building was situated immediately behind and at right angles to the extension containing a changing room and gym.  Off the changing room was a purpose built PE and sports hall.

9.	The CLASP building is first seen on the 1961 site layout plan, indicated as “proposed extension.”  Also on that plan is shown an existing small building in the grounds marked “present H/T’s house for conversion to married T/Staff house.”

10.	All the later plans to which we were referred show in the outside corner of the right angle of the CLASP building a unit on both ground and first floor termed variously “Head’s flat” (plan 2); “Flat” (plan 1); “Headteacher’s maisonette” (Scheme 4).  Throughout the hearing this unit was referred to as the Head’s flat and we will continue with that terminology throughout the decision.  Plans 5 and 6 show that at ground floor level the flat had its own external front door leading into a hallway, a dining room, living room and kitchen.  An internal staircase led out of the hall to the first floor which consisted of three bedrooms, a bathroom and a separate w.c.  On both floors there was an internal access into the main school building.  At ground floor level this led into the entrance hall and at first floor level into a corridor.

11.	As to whether the flat was ever lived in by the Headmaster, the evidence was far from clear.  Mr Jacobs told us that he had spoken to the former headmaster who had told him that he had not lived there but in a cottage in the grounds and Mr Jacobs contended that the flat was so named to enable it to be located speedily by the fire services and that its main use was in fact as overnight accommodation for the duty master.

12.	At our request the Commissioners wrote to Mr Andy Smith, the Land and Property manager of Nottinghamshire County Council, seeking further information on the use of the flat.  The reply they received contained in a letter of 1 March 2002 read as follows:
	“Number 1 and 2 Parkside were considered to be the head and deputy accommodation.  However the authority agreed that these properties could be used when not required by the head or deputy head i.e. as caretaker accommodation.  I am unable to confirm whether other staff at the school occupied the headmaster’s residence although this may have been the case on an as and when basis.”

13.	Numbers 1 and 2 Parkside were cottages in the grounds although they were not the cottage marked as headmaster’s residence referred to on the 1961 site layout plan.

14.	As to the use to which the remainder of the school buildings was put, the best evidence is gleaned from the plans including an extensive plan used by the cleaning staff which describes every room in the school, no matter how small, although a number of them are described only in very general terms.  From these plans it is apparent, and we so find, that the extension housed, on the ground floor, the kitchen, hall, dining room, library and craft and classrooms and, on the first floor, medical rooms, a nursery and a limited amount of residential accommodation.  The first floor of the CLASP building was devoted entirely to residential accommodation comprising dormitories, bathrooms and several staff bedsits.  The ground floor accommodated in the main a reception area, recreation rooms and craft and classrooms.  The usual utilities found in any school were dotted throughout.  To the left of the dining hall were single storey portacabins containing classrooms.

15.	When Mr Jacobs purchased the property he obtained planning permission to convert the school premises into a dwelling house, in which he and his family now live, on condition that the conversion did not exceed the original square footage of the school and that two timber cottages which housed a groundsman and caretaker were demolished.  The converted house thus follows the outline of the school building.  The purpose built sports hall was retained and is still used as such.

16.	In the conversion, the portacabins were demolished; the CLASP buildings were stripped to their steel structure, underpinned and rebuilt with brickwork facings; the kitchens, dining hall etc were razed and replaced with swimming pool, jacuzzi and changing rooms and prefabricated changing rooms linking the main school to the gym and sports hall were replaced with an orangery.  As far as the extension was concerned, the external walls, some internal walls and the roof structure were retained although the roof had to be re-boarded, felted and insulated.  The house constructed by Mr Jacobs is quite magnificent. The ground floor comprises formal and family living and dining room together with a most impressive array of sporting and leisure facilities.  The first floor consists of a number of en suite bedrooms and dressing rooms.

17.	The area of the new house which requires specific mention is that which has been erected in what was the far wing of the old CLASP building.  The corner area which had housed the head’s flat is now, on the ground floor, a games room and the wing beyond separated by a covered entrance which in effect is a drive through to the courtyard, is stabling.  On the first floor, over the games room is what Mr Jacobs described as a “sleepover room” containing eight sets of bunks beds and over the stables are three staff flats.

18.	At ground floor level entrance to the games room is off to the left of the main corridor which runs the length of that wing and opposite to the right is an external door leading into the covered entrance.  Immediately past these doors is an internal staircase leading to the first floor.  At first floor level, access to the sleepover room is through a door at the top of the stairs.  Access to the rest of the house is barred off at this juncture by an alarmed one way fire door operated by thumbscrew and opened from the house side only.  Mr Jacobs explained that this would prevent children staying in the sleepover room from running through the rest of the house and also secured the rest of the house from the occupants of the staff flats.

19.	 The staff flats are reached up a shared stairwell quite separate from the main house, which leads to a small hallway off which each flat has its own individual front door.  Each flat comprises an entrance hall, living room, dining room, kitchen, bathroom and bedrooms.  However a condition of the planning permissions for two of the flats was that they should have access to an emergency exit.  This exit is the same staircase which serves the sleepover room from the games room.  Access to this staircase from each of the two flats is again by an alarmed fire door opening outwards.  In an emergency therefore the occupants of these two flats would leave by their fire door, go down the staircase and straight out into the covered entrance.  At first floor level, the fire door across the corridor would prevent anyone gaining access to the rest of the house.  At ground floor level however it would be possible to reach the main corridor into the rest of the house from the foot of the stairs.

20.	Mr Jacobs’ claim for a refund of his VAT was submitted by his accountant and was accompanied by plans of the work done.  Omitted from the application was any claim for a refund of tax in so far as it related to the materials supplied to Mr Jacobs for the upper floor of what had been the old CLASP building.  The area on the plan covered by this was hatched red with an explanatory note that the hatching referred to “former relevant residential accommodation”

Legislation
21.	“Section 35 of the Act
(1)	Where

(a)	a person carried out works to which this section applies.

(b)	His carrying out of the works is lawful and otherwise than in the course or furtherance of any building, and

(c)	VAT is chargeable on the supply, acquisition or importation of any goods used by him for the purpose of the works.

The Commissioners shall, on claim made in that behalf, refund to that person the amount of VAT so chargeable.

(1A) The works to which this section applies are – 

		(a)/(b)  [Relate to construction of a building.}

		(c) 	a residential conversion

(1B) For the purposes of this section goods shall be treated as used for the purpose of works to which this section applies by the person carrying out the works in so far only as they are building materials which in the course of the works, are incorporated in the building in question or its site.

(1C) Where-

(a)	a person (‘the relevant person’) carries out a residential conversion by arranging for any of the work of the conversion to be done by another (‘a contractor’),

(b)	the relevant person’s carrying out of the work is lawful and otherwise than in the course of furtherance of any business

(c)	the contractor is not working as an architect, surveyor or consultant or in a supervisory capacity, and

(d)	VAT is chargeable on services consisting in the work done by the contractor,

The Commissioners shall, on a claim made in that behalf, refund to the relevant person the amount of VAT so chargeable.

(1D) For the purposes of this section works constitute a residential conversation to the extent that they consist in the conversion of a non-residential building, or a non-residential part of a building, into –

(a)	a building designed as a dwelling or a number of dwellings;

(b)	a building designed for use solely for a relevant residential purpose; or

(c)	anything which would fall within paragraphs (a) or (b) above if different parts of a building were treated as separate buildings …

(4)  The notes to Group 5 of Schedule 8 shall apply for construing this section as they apply for construing that Group.

4.2	1994 Act: Schedule 8 Group 5
Schedule 8 to the Act sets out forms of supply upon which VAT is zero-rated.  Group 5 is headed “Construction of Buildings etc” and sets out relevant supplies by construction or conversion.

Item No

		1.	The first grant by a person …
	
b) converting a non-residential building or a non-residential part of a building into a building designed as a dwelling or a number of dwellings or a building intended for use solely for a relevant residential purpose,
 
of a major interest in, or in any part of, the building, dwelling or its site.

2.	The supply in the course of construction of –

(a) 	a building designed as a dwelling or number of dwellings or intended for use solely for a residential purpose …

of any services related to the construction, other than the services of an architect, surveyor or any person acting as a consultant or in a supervisory capacity.

3.	[Relates to supplies to a relevant housing association.]

4.	The supply of building materials to a person to whom the supplier is supplying services with item 2 or 3 of this Group which include the incorporation of materials into the building (or its site) in question.

Notes …

(2)	A building is designed as a dwelling or a number or dwelling when in relation to each dwelling the following conditions are satisfied – 

(a)	the dwelling consists of self-contained living accommodation.

(b)	There is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling; …

(4)	Use for a relevant residential purpose means use as – 

(a)	a home or other institution providing residential accommodation for children;

(b)	a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder;

(c)	a hospice;

(d)	residential accommodation for students or school pupils;

(e)	residential accommodation for members of any of the armed forces;

(f)	a monastery, nunnery or similar establishment; or

(g)	an institution which is the sole or main residence of at least 90 per cent of its residents, except use as a hospital, prison or similar institution or an hotel, inn or similar establishment …

(7)  Subject to Note (9) below, “non-residential” in relation to a building, or part        of a building, means - 

(a)	neither designed nor adapted for use as a dwelling or number of dwellings nor for a relevant residential purpose, or

(b)	if so designed or adapted, was constructed before, and has not been used as a dwelling or number or dwellings or for a relevant residential purpose since, 1 April 1973 …

(9)  The conversion other than to a building designed for a relevant residential purpose, of a non-residential part of a building which already contains a residential part is not included within items 1(b) or 3 unless the result of that conversion is to create an additional dwelling or dwellings.”

Submissions as to the Facts and our Findings of Fact
22.	To succeed in his claim for recovery of VAT, the Appellant must establish that he carried out a residential conversion.  To establish this he must first show that the building before conversion was non-residential.  The Commissioners contend that the building was not non-residential because it fell within one of the categories contained in Note 4.  Our understanding form the Commissioners’ submissions is that they are contending only for (g) (an institution which is the sole or main residence of at least ninety per cent of its residents) or (d) (residential accommodation for students or school pupils). In paragraph 60 of her original submissions, Miss Graham-Wells expressly abandoned, for reasons unconnected with this appeal, the Commissioners original contention that the hall fell within 4(a).  We therefore address only 4(d) and 4(g) as argued.

23.	In relation to (g), the Commissioners seek the support of the case of Riverside School (Whassett) Ltd v Commissioners of Customs and Excise MAN/94/452 where the school was also for children with behavioural difficulties and in relation to which the chairman said:

“I return to Note 3 [now Note 4] … an “institution” of the kind mentioned in paragraph (a), (b) or (g) will always consist of more than one element.  The fundamental element is the residential accommodation, which in my judgment includes all the facilities which together constitute residence and of which facilities for sleeping, eating and washing are the most important, though by no means the only ones.  Other elements will cover administration, staff and, in appropriate cases, such things as laundry, motor transport and the upkeep of grounds … In the case of an institution such as the Appellant, where many if not all of the children are unable to cope in ordinary schools, or vice versa …, the institution must also provide the teaching, and it must also provide the supervision … All of those elements require to be housed.  Most of them are essential, in that if one of them is absent the institution will be unable to carry on its work properly or perhaps at all.

Some institutions have all or most of their various elements in one building.  Others, such as the Appellant, have separate buildings which together comprise the institution; …, each of those buildings can properly be said to be used for one or more of the purposes of the institution, even if no-one resides in it.”

24.	Miss Graham-Wells contended that Hopwell Hall contained “all the facilities which together constitute residence” and that the staff and pupils were its residents.  In relation to the boys, Miss Graham-Wells submitted that a stay of up to five years, even on a weekly basis was such that it could be said that Hopwell Hall was their main residence.  In relation to the staff, the provision of the headmaster’s flat and “bedsitting rooms” as opposed to “bedrooms” also indicated a degree of permanence.

25.	Mr Barlow’s submission was that Hopwell Hall was akin to any boarding school which would not be the main residence for its pupils.

26.	We accept Mr Barlow’s contention.  As he pointed out, for the figure of ninety per cent to be reached, the test must be applied to the children.  They attend Hopwell Hall on precisely the same time basis that any child attends a boarding school – initially they were full boarders (7 days per week) and then weekly boarders (5 days per week).  In either case they attended during term time only, returning home in the holidays.  No boarding school child, except in the rarest of circumstances, sees school as his home or main residence.  His main residence is where he returns for the holidays or weekends, usually his parents’ home.  The critical distinction between Hopwell Hall and Riverside School was that the Riverside children lived there all the year round.  They did not keep school terms.  Riverside was much more akin to a home than to a school.  We find that Hopwell Hall was not the sole or main residence of ninety per cent of its residents.

27.	Turning to (d), Miss Graham Wells relies again on Riverside and also on the case of Urdd Gobaith Cymru v Commissioners of Customs and Excise [1997] V & DR p.273 where it was held that the residential accommodation did not need to be of any minimum duration.

28.	Mr Barlow submitted that the building served several purposes but its function as a school outweighed all others.

29.	Hopwell Hall is in our view distinguishable from both Riverside and the accommodation in Urdd Gobaith.  In Urdd Gobaith, the accommodation in question was the development of a lodging facility for students attending educational courses.  The accommodation was purely  and simply the residential block, the point in issue being one of length to stay.  In Riverside, it was not contended that the school fell within (d), it being agreed that it fell within (a) of note 4.  It was also abundantly clear that rather more than ordinary teaching was provided at the school.  The chairman summed up the role of the school in the following way:

“The work of the school covers far more than formal classroom teaching.  It is described in a statement by Mr G H Leake another of the Appellant’s directors, as providing a total milieu which incorporates psychiatry and clinical and educational psychology together with prescriptive programmes and a complex programme of emotional and social readjustment.  Mrs Ward described the school as providing a therapeutic milieu with a 24-hour curriculum.  Only the severest cases are referred to the school; by the time the children are able to cope with learning in class, Mrs Ward said, in many cases the school’s work is complete, in that by that stage, although the children may still be disordered to some extent they are able to function without the constant supervision in which the school specialises.  The school operates throughout the year.”

30.	Riverside was clearly not primarily a school.  Contrasted with this, Hopwell Hall in our view and on the evidence in front of us was precisely that.  The children attended Hopwell Hall to be educated, to be taught.  They had special needs because of their behavioural problems and the education presumably was tailored to those needs but to be taught was the children’s purpose in being there.  If the children were not being educated they would not have been there at all.  Hopwell Hall is therefore in our view primarily a school.  Because the children boarded, residential accommodation was provided for them but the provision of such accommodation does not render Hopwell Hall itself “residential accommodation.”  We accept Mr Barlow’s contention and find that the building was first and foremost a school and that the residential accommodation served as a secondary function – to accommodate the children who were being educated there.  Put another way the purpose of the totality of the building, or the use to which it was put, was to educate the children and to accommodate them and such of the supervisory staff as were necessary whilst they were being educated.  The building was not therefore as a whole residential accommodation but included within it was an element of such.  Those parts which we would class as residential were the dormitories or the bedrooms, the staff bedsits, bathrooms and toilet facilities, kitchen, dining room and laundry.

31.	In summary we therefore reject the Commissioners’ submission that the building was used for a relevant residential purpose within the context of Note 4.

32.	The next question that arises is whether the building or any part of it was a dwelling or dwellings before conversion.  This point arises in relation to the head’s flat and the staff bedsits.  In this context we take the word dwelling to have its ordinary everyday meaning and it would contain such facilities as would be required to carry out the “major activities of life, particularly sleeping, cooking and feeding plus toilet facilities” (Look Ahead Housing Association v Commissioners of Customs and Excise [16816]).

33.	On this basis the staff bedsits were clearly not dwellings and so we find.  The plans indicate that they contained a washbasin but there was no further evidence of any description that they contained any facility beyond that – in particular no w.c. or cooking facility.

34.	It is clear from the 1961 site layout plan that it was intended to convert the headmaster’s house in the grounds into accommodation for the teaching staff.  Provision on the same plan is therefore made for the headmaster to have a flat within the proposed CLASP building.  It is clear from all the subsequent plans and indeed from the oral evidence we heard from Mr Jacobs and Mr Chiarella that such a flat was incorporated into the building.  The unit clearly has all the facilities for everyday living and must be a dwelling. In that it contained all those facilities within itself, it is a self-contained dwelling.  It has its own external front door on the ground floor but there is also internal access to the rest of the school at ground and first floor levels.  We therefore find that in the head’s flat there was, within the building as a whole, a part of the building which was designed as a dwelling.  

35.	We had no first-hand evidence as to occupation of the flat.  The evidence we did have consisted of a reported conversation which Mr Jacobs had had with the most recent headmaster, the correspondence from Mr Andy Smith and the various plans.  We accept that at some stage, and certainly by the time the school closed, the headmaster lived in a cottage in the grounds and not in the “headmaster’s flat” within the school building.  However this evidence is vague and lacks sufficient detail, especially as to date, to enable us to conclude from it that the flat had not been used as a dwelling at any time since 1 April 1973.
36.	Looking at the plans, it is clear from them that the flat remained a separately designated part of the school building throughout and certainly well after 1973.  There is no evidence from the plans, in fact quite the contrary, that the flat fell out of use or was absorbed into non-residential school use.
37.	Even when the flat was not lived in by the headmaster, all the evidence points to it having been occupied by duty members of staff.  Mr Barlow argued that in this context the flat was “not a home in the ordinary sense, for the normal occupant.”  It almost certainly was never the permanent home of a duty member of staff and almost certainly the duty staff would rotate but a dwelling is still a dwelling if it is lived in by a succession of occupants, each on a temporary basis rather than by one occupant as his permanent residence.  The flat differed from the staff bedsits because it was designed and constructed as a dwelling and contained within itself all the necessary attributes to be occupied as such.  
38.	We therefore find as a fact that the head’s flat was used as a dwelling after 1 April 1973, almost certainly in the early stages by the head himself and thereafter by the duty staff.

39.	Miss Graham-Wells deals with the staff flats in paragraphs 32, 114 and 115 of her submissions and contends that the flats created as a result of the conversion are not dwellings as defined in Note 2 as the construction fails to satisfy all the criteria listed in the note.  Miss Graham-Wells points out in her paragraph 32 that all that prevents access from the staff flats to the main building is an alarmed fire door.  Paragraph 115 reads as follows:

	“Access from the flats into the main building is only prevented by a push bar or ‘thumb bolt’ fire door on the first floor.  Once this door is opened the occupants of flats 2 and 3 can gain access to a room described by the Appellant as a sleepover room used by his children and their guests and from there down internal stairs to the games room and on into the main building.”

40.	It is not clear from this whether Miss Graham-Wells is submitting that the flats are not self-contained (2a) or that there is direct access to another dwelling (2b) or both. We will assume she contends both.

41.	In our view, and we so find, the flats are clearly self-contained.  They each contain all the facilities necessary to constitute a dwelling.  They each have their own front door which leads off a shared stairwell.  This common means of access is neither here nor there and as  Mr Barlow submits does not prevent flats from being self-contained and equally importantly does not amount to direct access between them.  There is no access directly from any one flat to any other.

42.	This leaves the fire escape.  That there is physically a means of access from two of the flats into the main house is clear.  Accessing this route, involves the occupant of the flat going through their fire door, which we understand is alarmed but this is not critical, down a staircase which they are permitted to only use in an emergency and from there into a part of the house that they are prohibited to use in this way.  Mr Barlow submits that this does not amount to “direct” access and we agree.

43.	Direct access, in our view, is clear, unfettered unobstructed access.  It also implies that the route is there for the purpose of gaining access, not that in a set of improbable circumstances it is possible to use it.  This is nothing more than an emergency exit route.  It is a physically indirect external exit.  We find as a fact that the three staff flats are self-contained dwellings and do not have internal direct access to any other dwelling or part of a dwelling.

Final Submissions and Conclusions
44.	For Mr Jacobs to be entitled to recover his input tax on the works to Hopwell Hall, he has to establish that he has carried out a residential conversion.  There are two elements to a residential conversion – a non-residential building or a non-residential part of a building has to be converted into a building designed as a dwelling or a number of dwellings.

45.	It must therefore be established at the outset exactly what has been converted – a building or a part building.  Once this has been established it then becomes necessary to ask whether that building or part building was non-residential.

46.	It is quite clear in this case that that which has been converted is the whole building – not just a part.  The original structure was gutted and out of it was created a dwelling house.  We are not therefore dealing with the conversion of a part building.

47.	The question then becomes whether that which has been converted – i.e. the entire original building – was non-residential.  “Non-residential” is defined by Note 7.  The building must neither have been designed or adapted as a dwelling nor for a relevant residential purpose.  The wording of Note 7 quite clearly refers back to the precise wording of Section 35(1D).  It is the building or part building out of which the dwelling is created which, as an entity, has to be non-residential.  Miss Graham-Wells’ contention in her original submission was first that Hopwell Hall had to be taken as a whole and secondly that taken as a whole Hopwell Hall was not a non-residential building because the whole building was used for a relevant residential purpose pursuant to either Note 4(g) or Note 4(d).  We have already found as a fact that Hopwell Hall did not fall within either category and was not therefore adapted or designed for a relevant residential purpose.  The Commissioners have never contended that the building was designed as a dwelling which, despite the headmaster’s flat in one corner of one wing, it clearly was not.  There were, as we have found, elements of the building which would have been residential but we are considering the building in its entirety because it is the entire building to which the works of conversion were carried out.  What was converted was a building which was primarily a school, and the headmaster’s residence and the boys residential accommodation were ancillary to that main purpose.  The residential accommodation within the school was a functional and necessary adjunct to the main purpose of the school.  We therefore find that Hopwell Hall was, before conversion, a non-residential building.

48.	We should refer specifically to paragraph 52 of Miss Graham-Wells’ original submission because this in effect sets out the Commissioners’ view and interpretation of the legislation and what they believe Mr Jacobs must show to be entitled to recover his input tax.  Paragraph 52 reads as follows:

	“Therefore, the appellant must show that Hopwell Hall was a non-residential building or that  that part of Hopwell Hall that was affected by the works was a “non-residential part of a building” before the works were carried out and secondly that that building, or part thereof, was “converted” into a building designed as a dwelling or a number of dwellings…”

49.	This contention presupposes that the dwelling or dwellings which are created have to be created out of “the part affected by the works”.  In other words the Commissioners are also at this stage accepting that what one looks at is what is converted.  In this case it is the entire building that has been converted and it is therefore the entire building that was affected by the works and it is “that building” which has been converted.  

50.	Again, if one looks at the position backwards, one could ask from what has Mr Jacobs’ new home been created.  The answer to that is that it has been created from the entirety of the original structure.  No single part has been converted into a dwelling – the whole building has.  A building which was, as a whole, non-residential, has been converted into a dwelling to the whole of its original extent. 

51.	Miss Graham-Wells in her final submission, sought to distinguish between the creation of the main house and the creation of the staff flats.  Her argument was that the main house was merely an extension to the existing residential part of the building but that the staff flats were created out of a non-residential part of the building.  Her contention therefore was that Mr Jacobs should be denied his input tax on the works to the main house but could recover it on the creation of the staff flats.

52.	We believe that both these contentions are flawed.  First we do not accept that the main house was merely an extension.  One can look at its appearance, its physical layout, its function, it facilities and its equipment and it is quite clear that what has been created is a brand new house.  A bystander observing the works would not for one moment regard what he was seeing as an enlargement or an extension of what had been there before but the creation of something new.  A school has been converted into a luxury home.  A dwelling has replaced a school.  This is no extension.

53.	With regard to the staff flats, it is clear from our findings of fact (paragraph 14) which are drawn from the plans and the oral evidence that they were created out of what originally had been entirely residential – the upper floor of the far wing of the old CLASP building.  This had originally housed dormitories, bathrooms and staff bedsits.

54.	Miss Graham-Wells relied on section 35(1D)c and paragraph 30 of the Court of Appeal judgment in Blom-Cooper.  This section would have been relevant to Miss Graham-Wells’ contention because it is the mechanism by which the three staff flats, situated as they are in one building, could be brought within section 35(1D)a but the section is not applicable given our findings and has no relevance to our decision.  We do not believe note 9 is applicable, dealing as it does with the conversion of a part building, rather than the whole building with which we are dealing.

55.	The appeal is therefore allowed and Mr Jacobs is in our view entitled to recover the input tax which he has claimed.  

56.	Mr Barlow made an application for costs which we allow and leave them, to be determined by a chairman sitting alone if incapable of agreement.

LADY MITTING
CHAIRMAN
Release Date:

MAN/01/275