20809

ZERO-RATING – wall enclosing cemetery – whether a building – no – appeal dismissed

LONDON TRIBUNAL CENTRE

	ADATH YISROEL SYNAGOGUE	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)
					CAROLINE DE ALBUQUERQUE

Sitting in public in London on 18 September 2008

Patrick Taylor, counsel, instructed by Freshfields Bruckhaus Deringer LLP, for the Appellant

Rodney Dixon, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	Adath Yisroel Synagogue appeals against a letter ruling of 13 September 2007 that the perimeter wall of a cemetery at 246 Carterhatch Lane, Enfield did not qualify for zero-rating as a building.  The Appellant was represented by Mr Patrick Taylor and the Respondents (“Customs”) by Mr Rodney Dixon.
2.	There is a subsidiary issue concerning whether the use is solely for a relevant charitable purpose, which Mr Dixon asked us to give Customs further time to consider if we found in favour of the Appellant on the main issue.
3.	There is no dispute about the facts.  We find that:
(1)	The Appellant is the Community’s parent synagogue and has a social and religious responsibility to ensure that the cemetery is fit for its purpose and properly maintained as a Jewish resting place, for which the building of the Wall was necessary because in 2005 it was found that foxes and rats were damaging graves and there was evidence that the cemetery was being used by prostitutes and drug users.  Advice was taken from a pest control company who concluded that a permanent structure completely enclosing the cemetery was necessary and had to be high enough to prevent it from being scaled and deep enough to prevent foxes from digging under the foundations.
(2)	The structure in question (“the Wall”) is a six-foot high 850 meter long structure round the perimeter of the cemetery costing about £450,000 funded by donations from the Community.  It was designed by an architect, John Stebbing, who managed its construction.  We saw a photograph of the Wall and the architect’s drawings.
4.	Group 5 of Schedule 8 to the VAT Act 1994 zero-rates:
2  The supply in the course of the construction of—
(a)     a building designed as a dwelling or number of dwellings or intended for use solely for a relevant residential purpose or a relevant charitable purpose; or
(b)     any civil engineering work necessary for the development of a permanent park for residential caravans,
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.
Notes
…
(2) A building is designed as a dwelling or a number of dwellings where 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;
(c)     the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision; and
(d)     statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent.
(3) The construction of, or conversion of a non-residential building to, a building designed as a dwelling or a number of dwellings includes the construction of, or conversion of a non-residential building to, a garage provided that—
(a)     the dwelling and the garage are constructed or converted at the same time; and
(b)     the garage is intended to be occupied with the dwelling or one of the dwellings.
(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.
(5) Where a number of buildings are—
(a)     constructed at the same time and on the same site; and
(b)     are intended to be used together as a unit solely for a relevant residential purpose;
then each of those buildings, to the extent that they would not be so regarded but for this Note, are to be treated as intended for use solely for a relevant residential purpose.
(6) Use for a relevant charitable purpose means use by a charity in either or both the following ways, namely—
(a)     otherwise than in the course or furtherance of a business;
(b)     as a village hall or similarly in providing social or recreational facilities for a local community.
…
(18) 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 facade or where a corner site, a double facade, the retention of which is a condition or requirement of statutory planning consent or similar permission.
5.	Mr Taylor, for the Appellant, contends:
(1)	Whether the Wall is a building is a reasonable man test.  As Warren J said in Procter &Gamble v HMRC [2008] STC 2650 at [28]: 
“It is a mater of law what meaning is to be attached to words, but once it is decided, as a matter of law, that a word is to be given its ordinary meaning, it is a matter of mixed fact and law what that meaning actually is.  It is a jury question, as explained, in the sense that a jury can determine it without judicial exegesis.
29.  …However, the reasonable man in the street is not to be removed from the scene by some judicially imposed detgention-without-charge.  Once he has understood the context in which he is to form a view, the question of similarity [which was the issue in that case] is for him.”
(2)	One should bear in mind that zero-rating exists only where it is for clearly defined social reasons for the benefit of the final consumer (art.110 of the Recast VAT Directive).  The social purpose should be considered.
(3)	That Directive contains a definition that “‘building’ shall mean any structure fixed to or in the ground.”  This is in the section on taxable persons and relates to the power of states to tax the supply of buildings before first occupation.
(4)	The Tribunal defined building in Upper Don Walk Trust v HMRC (2006) VAT Decision 19476:
“In our view, the word ‘building’ connotes an enclosure of sorts.  It will enclose a volume of space or provide a place within which person or things can be accommodated.  All the structures which, in ordinary speech would undoubtedly be regarded as buildings have this characteristic in common: for example, a house, a factory, a warehouse, an amphitheatre.  A building will usually have walls and, though not invariably, a roof.  All these structures enclose a volume of space and provide a place within which something can be accommodated any by any view must be regarded as ‘buildings’”
(5)	In Stevens v Gourley (1859) 7 CN (NS) 101 at 757 Byles J said:
“What is a ‘building’?  Now, the verb ‘to build’ is often used in a wider sense than the substantive ‘building.’  Thus a ship or a barge-builder is said to build a ship or a barge, a coach-builder to build a carriage; so birds are said to build nests: but neither of these when constructed can be called a ‘building.’ It is a well-established rule, that the words of an act of parliament, like those of any other instrument, must if possible be construed according to their ordinary grammatical sense.  The imperfection of human language renders it not only difficult, but absolutely impossible, to define the work’ building’ with any approach to accuracy.  One may say of this or that structure, this or that is not a building; but no general definition can be given: and our lexicographers do not attempt it.  Without, therefore, presuming to do what others have failed to do, I may venture to suggest, that, by ‘a building’ is usually understood a structure of considerable size, and intended to be permanent, or at lest to endure for a considerable time.”
(6)	In Cheshire County Council v Wooodward [1962] 1 All ER 517 at 519 Lord Parker CJ, with whom Ashworth J and Mackenna J concurred, said:
“…it seems to me that when the Act defines a building as including ‘any structure or erection and any part of a building so defined’, the Act is referring to any structure or erection which can be said to form part of the realty, and to change the physical character of the land.”
(7)	The Tribunal in Smith v Customs and Excise Commissioners (1990) VAT Decision 5579:
“Most people can easily recognise a ‘building’ when they see one; and most people can recognise a ‘caravan’ or ‘mobile home’ when they see it.  And if the conclusion is analysed it will be apparent that physical characteristics and user will form significant if not decisive, features in reaching he conclusion….It is perfectly possible for a structure which started its life as, say, a holiday caravan intended to be towed behind a car, to become a building, albeit a temporary building, by having its mobility features such as wheels and tow-bar removed and being jacked up on bricks or concrete blocks on its own enclosed site and converted into a dwelling home.  It will then be a building even though a temporary building.”
(8)	It was not possible to define a building exhaustively.  Dictionary definitions tended to be too wide and there were exceptions to any definition one put forward.  For example, a multi-storey car park was a building without walls and perhaps without a roof, and an amphitheatre could be a building without a roof.  The Eifel tower is a building without any walls or roof.
(9)	While a wall is not always a building in some circumstances it could be a building.  Here, bearing in mind that it is fixed to he ground (see the VAT Directive definition), it encloses something (Upper Don Walk Trust), its size (Stevens v Gourley), it forms part of the realty and changes the physical character of the land (Cheshire County Council), its use and physical characteristics (Smith), and taking into account social reasons, it is possible for a reasonable man to conclude that the Wall is a building.
6.	Mr Dixon, for Customs, contends:
(1)	A wall can never be a building.  The Wall was a boundary wall that might have enclosed anything.  Its essential character was a wall.  If the Appellant is right any wall enclosing something would qualify (in reply, Mr Taylor did not accept that).
(2)	The meaning of building in other statutory contexts is not determinative.  The object and purpose of the VAT legislation must be considered.  In the context of item 2 of Group 5 the reference is to residential or similar buildings. The definition in the VAT Directive was for the purpose of the definition of taxable person.
(3)	The Tribunal in Parkinson v Customs and Excise Commissioners (2001) VAT Decision 16257 said at [16]:
“The New Oxford Dictionary of English definition of ‘building’ contains the words ‘a structure with roof and walls such as a house, school or factory.’  To call the houseboat a ‘house’ (the closest to the examples in the two definitions) would, we think, be misleading.  The appropriate and, in our view, the only proper word in the English language to describe Dr Parkinson’s houseboat is ‘a houseboat.’  The works carried out by Dr Parkinson amount to the construction of a houseboat. 
Applying the same logic here the Wall is a wall.
(4)	The essential characteristic of the Wall is a wall only, just as the bridge in Upper Don Walk Trust was a bridge.  The tribunal’s references to enclosing a volume of space was made in the context of its examples of a house, a factory, a warehouse, and an amphitheatre.
7.	We are indebted to counsel, particularly Mr Taylor, for their extensive researches.  We regard the context and history of the VAT legislation as important and we believe that the Appellant did not give this the priority it deserved.  Originally all building and civil engineering construction (and their alteration and demolition) work was zero-rated and the Wall would have qualified.  Following a challenge by the European Commission to the width of the legislation going beyond what was necessary for clearly defined social reasons for the benefit of the final consumer in what is now art 110 of the Recast VAT Directive, resulting in the judgment of the European Court in EC Commission v United Kingdom [1988] STC 456, this group of zero-rating was severely restricted to the construction of buildings designed as dwellings or intended for use as a relevant residential purpose (defined to include residential home for children, a hospice, residential accommodation for students or school pupils, a monastery or nunnery, an institution which is the residence of at lest 90 per cent of its residents, and excluding a hospital, prison or hotel).  We are concerned here with buildings intended for use for a relevant charitable purpose (defined as use by a charity otherwise than in the course or furtherance of a business, or as a village hall or similarly in providing social or recreational facilities for a local community) which is not restricted to residential accommodation.  At the same time the zero-rating was removed from industrial and commercial buildings and civil engineering works as the ECJ and found that these were not for the benefit of the final consumer.  These factors point to an interpretation of “a building” that would include what ordinary people would regard as a building rather than as civil engineering work.
8.	Bearing in mind the authorities cited to us we have to apply a reasonable man test to the ordinary meaning of “a building.”  We found the point made by Byles J in Stevens v Gourley instructive, that the verb to build is often used in a wider sense than the noun building.  The Wall was undoubtedly built, the work constructing it was building work, but that does not mean that it is a building.  
9.	We stand back and ask ourselves whether the Wall is a building in the context of this zero-rating.  Not without regret bearing in mind the necessity for the building of the Wall, we conclude that it is not.  
10.	Accordingly we dismiss the appeal.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE: 22 September 2008

LON/07/1748