19176
	VAT — ZERO-RATING — whether work of removal of lead guttering of oriel bay window of protected building and associated drainpipe and addition of layer of slates work of alteration or repair and maintenance — held work that of alteration — appeal allowed

MANCHESTER TRIBUNAL CENTRE

 
 	
	DON STARR	Appellant

	- and -

	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	David Demack (Chairman)
						Jon P M Denny	

Sitting in public in Manchester on 4 July 2005

The Appellant in person

Sara Williams of counsel instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	The Appellant, Mr Donald Starr, owns the three-storey listed dwelling house known as The Manor House, Tees View, Gainford, Darlington (“the House”).  At first storey level, on its front, the House has an oriel bay window with a pitched slated roof.  The bay was constructed some time after the House itself.
2.	The bay was drained by a lead gutter leading to a drainpipe which ran at an angle to the horizontal across the front of the House causing rainwater to fall into the garden of a neighbouring property.  Due to a design fault arising out of the separate later construction of the bay, the lead gutter leaked, causing the wood framing the bay to rot.
3.	Consequently, Mr Starr applied for listed building consent to remove the gutter and drainpipe and to add an extra layer of slates allowing rainwater falling on the roof of the bay simply to run off the slates and fall onto the pavement outside the House.  The consent was granted by Teesdale District Council on 3 September 2003 in a document entitled ‘Planning permission’, the authorised work being described as “external alterations”.
4.	In total, the work entailed the removal of the gutter and drainpipe, the removal of some roof slates above the window, the changing of the roofline above the window by altering the roof pitch, and the adding of an extra layer of slates.
5.	Although he was charged VAT on the building contractor’s services, Mr Starr believed the work to be that of alteration and sought a ruling from Customs to that effect.  They decided that the work consisted of repairs and maintenance, and did not qualify for zero-rating.  It is against that decision, subsequently confirmed on review, that Mr Starr now appeals.
6.	Item 2 of Group 6 of Schedule 8 to the Value Added Tax Act 1994 (for which schedule section 30 of the Act provides) zero-rates:
“The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity”.
Item 3 of Group 6 goes on to zero-rate the supply of building materials by a person supplying services within item 2.
7.	Note 6 to Group 6 states that an alteration approved for zero-rating purposes:
“does not include any works of repair or maintenance, or any incidental alteration to the fabric of a building which results from the carrying out of repairs, or maintenance work.”
8.	Customs’ views on work on listed buildings qualifying for zero-rating are to be found in section 9 of their Public Notice 708 (Buildings and Construction) and their counsel, Miss Sara Williams, relied on those views to support their claim that the work carried out by Mr Starr was that of repair and maintenance.
9.	Paragraph 3 of section 9 explains Customs’ view of an ‘alteration’ as follows:
“A building is altered when its fabric, such as its walls, roof, internal surfaces, floors, stairs, windows, doors, plumbing and wiring is changed in a meaningful way.  But works of repair or maintenance, or any incidental alteration resulting from works of repair or maintenance, are always standard-rated, even if the work has been included in the listed building or schedules monument consent.”
10.	And at paragraph 9.3.1, Customs view of works of repair or maintenance is explained thus:
“Works of repair or maintenance are those tasks designed to minimise, for as long as possible, the need for, and future scale and cost of, further attention to the fabric of the building.
Changes to the physical features of the building are not zero-rated alterations if, in the exercise of proper repair and maintenance of the building, they are either:
-	trifling or insignificant, or
-	dictated by the nature and use of modern building materials.  
Similarly, if the amount of work or cost is significant, that does not make the work a zero-rated alteration if the inherent character of the work is repair and maintenance.”
11.	Mr Starr submitted that the works he had carried out were those of alteration and resulted in him obtaining three benefits from carrying them out namely:
1.	improving water flow from the roof of the bay;
2.	an aesthetic improvement arising from the removal of the unsightly drainpipe; and 
3.	rainwater from the roof ceasing to drain on to a neighbouring property.
12.	He maintained that the work carried out was not trifling or insignificant, such would have been the case of repairs, and was not dictated by the use of modern building materials.  He claimed that, had the works been mere repairs, they would not have required listed building consent and could have been carried out in a much simpler and cheaper manner.  
13.	It is common ground that the work was carried out by Mr Starr to a protected building and, if it was that of alteration, was approved.  
14.	In Commissioners of Customs and Excise v Morrish [1998] STC 954, Moses J held that item 2 of Group 8A of Schedule 5 to the Value Added Tax Act 1983 (the predecessor of the 1994 Act) required three conditions to be satisfied if the supply were to be zero-rated: that there should be an alteration; that the alteration was neither repair nor maintenance; and that the alteration be approved.  At p.957 the learned judge said:
“Note (3) to Group 8A [of Schedule 5 to the Value Added Tax Act 1983 – now note (6) to Group 6 of Schedule 8 to the 1994 Act] defines what is meant by ‘approved’.  Under note (3)(c)—
	‘… works of alteration which may not … be carried out unless authorised under, or under any provision of, — (i) Part I of the Planning (Listed Buildings and Conservation Areas) Act 1990 … and for which … consent has been obtained under any provision of that Part …’
Thus there must both be authorisation, inter alia, under Pt I and consent.  It is important not to confuse that statutory definition of ‘approved’ with the meaning of ‘alteration’.  There is no statutory definition of what is meant by ‘alteration’ other than it does not include repair or maintenance.
	What then is alteration?  In ACT Construction Limited v Customs and Excise Comrs [1982] STC 25 at 29, [1981] 1 WLR 1542 at 1547 Lord Roskill said that the words in the provisions should be given their ordinary meaning.  
	In a different statutory context Lord Roskill (see [1982] STC 25 at 28, [1981] 1 WLR 1542 at 1546) decided that ‘alteration’ meant ‘structural alteration’.  I should emphasise the different statutory context in that case.  Their Lordships’ House was dealing with Group 8 in Sch 4 to the Finance Act 1972 as amended by para 3 of the Value Added Tax (Consolidation) Order 1976, SI 1976/128.  Item 2 of the notes referred to ‘the supply in the course of the construction, alteration or demolition of any building’.  Note (2) stated: ‘Item 2 does not include — (a) any work of repair or maintenance’.
	It will be noted that under the statutory provisions the word ‘alteration’ found its place in between the words ‘construction and demolition’.  I need not finally decide in the instant case whether, in the new statutory context, ‘alteration’ means ‘structural alteration’, but it probably does.  
	This case once again illustrates the danger of using dicta in one case dealing with a statutory context in another where the words of the statute are not the same.”
15.	Proceeding on the basis that ‘alteration’ in the present contect does in fact mean ‘structural alteration’ and giving alteration its ordinary meaning of the action of making otherwise or different in some respect, without changing the thing itself (see the Shorter Oxford English Dictionary), we have no hesitation in holding that the work carried out by Mr Starr met the statutory requirements for zero-rating.  The work was not that of repair – the restoring to good condition by renewal or replacement of decayed or damaged parts – or maintenance; it was much more substantial, albeit on a small scale.  The structure of the House was altered as a result of the roof of the oriel bay being changed.
16.	We allow the appeal, and direct the Respondents to pay Mr Starr’s costs of £50.

DAVID DEMACK 
CHAIRMAN
Release Date: 21 July 2005
MAN/05/0043