[2013] UKFTT 498 (TC)
TC02887
Appeal number: TC/2012/07473
VAT – reduced rate for renovation of residential
premises- Item 1 Sch7A VATA 1994 – condition that premises be unoccupied for 2
years before start of works – whether the evidence before the tribunal was
enough to conclude that that was likely – Held: no. Appellant seeking in
accordance with HMRC’s published practice certification from council’s empty
property officer – council unhelpful – whether that affected the outcome of the
appeal- Held no.
FIRST-TIER TRIBUNAL
TAX CHAMBER
|
|
GURPREET SINGH
BHACHU
|
Appellant
|
|
|
|
|
|
|
- and -
|
|
|
|
|
|
|
|
THE
COMMISSIONERS FOR HER MAJESTY’S
|
Respondents
|
|
|
REVENUE &
CUSTOMS
|
|
|
TRIBUNAL:
|
JUDGE CHARLES HELLIER
|
|
|
JOHN ROBINSON
|
Sitting in public at Bedford Square WC1B 3DN on 28 May 2013
Mr I Chakraborty for the Appellant
Mrs Erika Carroll for the Respondents
© CROWN COPYRIGHT
2013
DECISION
1. This
appeal relates to the application of the reduced (5%) rate of VAT provided for
in section 29A and Item 1 Group 7 Schedule 7A VAT Act 1994.
2. This is a
full statement of our findings and reasons for dismissing the appeal. On 1
August 2013 the tribunal released a decision which contained a fairly extensive
summary of our findings and reasons. On 6 August 2013 the appellant sought
permission to appeal to the Upper tribunal. But Rule 35(4) of the tribunal’s
rules requires a party to apply for a notice of full findings and reasons
before he may seek permission to appeal. We therefore took his application to
be such a request, and this slightly fuller decision is the result. Once this
notice has been sent to the appellant he may renew his application to appeal.
3. Section
29A provides that:
“(1)VAT charged on-
(a)
any supply of a description for the time being specified in Schedule7A…
shall be charged at the rate
of 5%.”
4. Item 1 of
Group 7 of that Schedule specifies:
“1. The supply in the course
of the renovation or alteration of qualifying residential premises of
qualifying services in relation to the renovations or alterations”
5. And Note
(3) to Item 1 provides that a supply falls within this item only if either:
(1)
the premises had not been lived in for 2 years before the start of the
works; or
(2)
the premises had been unoccupied for two years before their acquisition
by someone who then lived in them and the work started within one year.
It will be seen that it is the
first of these conditions which is relevant in this appeal.
Background
6. Mr Bhachu
was engaged to renovate and alter 266 Kings Road, Kingston-on-Thames by its new owners Mr Kakatsos and Mrs Vasanthi Kakatsos. He did the work in the
first part of 2011 and the new owners moved in shortly afterwards.
7. In his
10/11 VAT return (that for the period ending 30 October 2011) Mr Bhachu
accounted for VAT at 5% on these works on the basis that they fell within Item
1 of Group 7.
8. HMRC were
satisfied that 266 Kings Road was qualifying residential premises and that the
supply was of qualifying services but were not satisfied that the condition of
Note 3 that the property had been unoccupied for two years had been met, and
assessed Mr Bhachu accordingly. Mr Bhachu appeals against that assessment.
9. The only
issue for us in this appeal was thus whether the property which Mr Bhachu
renovated had been empty for two years before he started work.
The evidence
10. Mr Chakraborty drew our
attention to HMRC's notice in relation to the application of the 5% rate.
Section 8.3.2 of that notice indicates that a trader may be required to prove
that the property had been empty for the required period and then continues:
"Proof of such can be
obtained from the electoral roll and council tax records, utilities companies,
empty property officers in local authorities, or any other source that can be
considered reliable.
"If you hold a letter
from an Empty Property Officer certifying that the property has not been lived
in for 2 years, you do not need any other evidence. If an Empty Property
Officer is unsure about when a property was last lived in he should write with
his best estimate. We may then call for other supporting evidence."
11. Mr Chakraborty had attempted
valiantly to obtain such a certificate from Brent council but they had told him
they did not have an empty property officer and had not been helpful. He
provided evidence of his attempts to obtain confirmation from that council. The
only other evidence before us was of copies of letters
between the parties and to Brent Council, copies of two council tax demands
addressed to the new owners and the oral evidence of Mr Bhachu.
12. The following evidence
related to the time of acquisition of the house by Mr Kakatsos and Mrs Vasanthi
Kakatsos, the date Mr Bhachu first saw the house, the period in which he worked
there, and the date on which the new owners moved in:
(1)
Mr Bhachu’s invoices
are dated 18 March 2011 and 6 April 2011. It was not clear that these were
delivered only after the work had completed. Mr Bhachu told us that the work
had taken some 12 to 14 weeks. Mr Bhachu put the start of his work as sometime
in January 2011.
(2)
Mr Bhachu told us that when he started work there was an estate agent's
board outside the house.
(3)
Two council tax demand notices addressed to Mr Kakatsos and Mrs Vasanthi
Kakatsos were in the bundle before us. These show periods of charge of (1) 11
February 2011 to 31 March 2011, and (2) 1 April 2011 to 31 March 2012. Each
charge was rebated to nil (we understood because the property was considered to
be empty). The first of these notices carries the legend "Reason for Bill:
New Accnt". This to our minds puts the latest date for completion of the purchase
as 11 February 2011.
(4)
Mr Bhachu told us that that Mr Kakatsos and Mrs Vasanthi Kakatsos had
bought the house 3 to 4 months before he started work.
(5)
Mr Bhachu told is that he was taken to see the property a week or so
before he started work. He was uncertain as to the time of year but thought
that it may have been summer.
13. It seems unlikely to us that
the purchase was completed before 11 February 2011: if the new owners had
completed the purchase before that date we can see no reason why the council
tax bill would have been for "New Accnt" starting on that date. We
conclude that it is likely that the purchase was completed on 11 February 2011.
14. It seems to us possible that
Mr Kakatsos and Mrs Vasanthi Kakatsos had access to the property before
completion of the purchase; indeed they may have exchanged contracts for its
completion some months before completion and had access after exchange. It is
possible that Mr Bhachu visited the property before 11 February in pursuance of
access given to the purchasers
15. We conclude that Mr Bhachu’s
hazy recollection of visiting the property during the summer was probably a
mistake, that he first visited in early January 2011 and he started work
shortly thereafter. We think it unlikely that he started work before completion
and so conclude that he started shortly after 11 February 2011. We also
conclude that it is likely that Mr Kakatsos and Mrs Vasanthi Kakatsos moved
into the house in the latter part of 2011.
16. Thus the question for us was
whether the house had been unoccupied for two years before about 11 February
2011.
17. The following evidence
related to the question of how long the house had been empty before 11 February
2011:
(1)
Mr Chakraborty wrote to Brent Council on 15 March 2012
saying "from various private sources including neighbours it's found out
that the subject was uninhabited for 4 years".
(2)
In the notice of appeal Mr Chakraborty said that there had been a verbal
confirmation from the owner/buyer that the property had been vacant for two
years or more;
(3)
Mr Bhachu told us that:
(a)
there was no furniture in the house
(b)
there were quite old and fairly dirty curtains at the windows;
(c)
there was damp in the kitchen;
(d)
the electricity was working;
(e)
there were small tree seedlings which were five or six feet high growing
in the garden, together with some small shrubs but no brambles;
(f)
there was a fish tank in the garden with water but no fish; and
(g)
he had spoken once or twice to the neighbours.
18. Of these factors the growth
of seedlings in the back garden appeared of significance. It suggested to us
that the garden had been unattended for several years. That would have been
consistent with the property having been vacant for that time but it would also
have been consistent with the ill-health or incapacity of an occupant.
19. Mr Bhachu did not give us
any details of statements made by the neighbours about the previous
inhabitants. We take the statements in Mr Chakraborty’s letters as evidence of
what Mr Bhachu told him, but we had no detail about who said what and when, or
anything by which we could test the reliability or accuracy of the statements
made by neighbours, or the extent of their knowledge.
Discussion
Was the house shown to be empty for two years?
20. Where an appeal is brought
by a taxpayer the general rule is that that taxpayer has to prove his case.
That is to say he must bring to the tribunal sufficient evidence to convince
the tribunal that it is more likely than not that his view of the facts is the
right one. That is because generally it is the taxpayer who knows or has the
best prospect of finding out what happened and when.
21. We had to determine from
the evidence before us whether it was more likely than not that the house
was empty for two years before Mr Bhachu started work.
22. There is no requirement that
such evidence be from any particular source or in any particular form: we may
have been persuaded by a certificate from the council that the property was
empty, but equally we may have been persuaded by the testimony of a neighbour
who came to the tribunal to tell us who had lived in the house and when.
23. Unfortunately evidence of
neither of these was available, and the evidence before us was not sufficient
for us to be able to conclude that it was likely that the property had been
empty for a two year period before Mr Bhachu started work.
24. We must pay tribute to the
valiant efforts made on behalf of his client by Mr Chakraborty who presented
his client's case with clarity and consideration. Unfortunately however he was
unable to provide sufficient evidence for us to find for his client.
HMRC’s Notice 708 Customs: Building and construction
25. Mr Chakraborty drew our
attention to the words of paragraph 8.3.2 of this notice, which are quoted
above. He said that the council had not fulfilled its obligations and that HMRC
had not “called for other supporting evidence”.
26. We accept that the words of
paragraph 8.3.2 of Notice 704 could be taken in two ways:
(1)
as indicating that if the Empty Property Officer’s statement was
equivocal the taxpayer would be called upon to provide HMRC with other
evidence; or
(2)
as indicating that HMRC would call upon the Council to provide further
evidence.
27. It seems to us that first of
these is the natural way to read those words. That is because the VAT Act does
not impose an obligation on HMRC itself to seek out the evidence to support a
taxpayer’s claim. If that is right then it seems to us that HMRC did tell the
taxpayer that he needed to provide further evidence: for in HMRC’s letter of 7
March 2012 denying the reduced rate, they say:
“As discussed in order to
qualify for reduced rate the property should have been vacant for 2 years
however to date no further proof has been provided.”,
and in HMRC’s review letter of 2
July 2012, which follows correspondence in which Mr Chakraborty explained his dealings
with Brent council, they say
“ …as you did not have
evidence that the property had been empty for 2 years …you could not be
certain, and did not have the proof, that the property had been unoccupied for
the required 2 years…”
.
28. However, even if the second
reading of the words in para 8.3.2 is the correct way to read them, it cannot
affect the outcome of this appeal. The notice is a statement by HMRC. It only
represents HMRC’s views. No doubt those views are carefully considered and
generally represent the law, but even if HMRC failed to comply with what they
thought was their obligation that would not affect the VAT due on the supply
under the Act - because the amount of VAT due is determined by the Act, not
HMRC’s views.
29. That last sentence is
subject to this caveat. If HMRC’s statement and actions gave rise to a
legitimate expectation in the mind of the taxpayer that he had done all that
was necessary and that, having done so, the buck passed to HMRC, then some
public law remedy might be available to him. But in this case the content of
HMRC’s letters make clear that that is not how they viewed the position and the
taxpayer cannot draw from then any legitimate expectation that HMRC regard the
onus of calling for evidence from a third party as lying upon them.
30. Nor can the taxpayer succeed
in an argument that the Council was in default of a duty relevant to the
computation of VAT under VAT Act 1994. Not only is there no such duty in the Act,
but HMRC’s notice could not impose such a duty upon it.
Disposition
31. We therefore dismiss the
appeal
Rights of Appeal
32. 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.
33. Permission cannot be given
to appeal unless the applicant can point to an error of law which it
says that the tribunal made.
34. Finally, we note that in the
application referred to in paragraph 2 above Mr Chakraborty says that Mr Bhachu
may seek new evidence from the occupiers of the neighbouring houses. It is only
fair to point out that such evidence could not be taken into account by this
tribunal to revisit or review its decision: this tribunal was required to find
the facts on the evidence before it at the hearing.. Nor could such new
evidence be relevant to any argument on an appeal before the Upper tribunal that
this tribunal had erred in law. That tribunal may only interfere with the
decision of this tribunal if it finds that this tribunal has erred in law –
that is to say misapplied or misunderstood the law or come to a wholly
unreasonable conclusion on the evidence which had been before it..
CHARLES HELLIER
TRIBUNAL JUDGE
RELEASE DATE: 20 September 2013
