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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> McDove & Anor v Revenue & Customs [2006] UKVAT V19501 (15 March 2006) URL: http://www.bailii.org/uk/cases/UKVAT/2006/V19501.html Cite as: [2006] UKVAT V19501

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19501

Zero Rating – whether "granny flat built onto and into the Appellants house both houses having an exit into a conservatory with on external exit – Memorandum of Agreement between Appellant and local authority prohibiting sale and restricting occupancy. Whether flat entitled to zero rating. Appeal refused. VATA 1994, s.30 Schedule 8, Group 5, note (2)(c).

EDINBURGH TRIBUNAL CENTRE

DAVID AND AILEEN McDOVE Appellants

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: (Chairman): T Gordon Coutts, QC

(Member): Mrs Charlotte Barbour, CA., ATII

Sitting in Edinburgh on Monday 6 March 2006

for the Appellants Mr McDove

for the Respondents Mr Andrew Scott, Shepherd & Wedderburn WS

© CROWN COPYRIGHT 2006.


 

DECISION

Introductory

The mother of the second Appellant, Mrs Harris, in and by 2002 suffered from serious and disabling medical conditions. She would either have required extensive care or hospitalisation. In order to provide Mrs Harris with some quality of life the Appellants, who also have the misfortune to have an autistic son, determined to create a dwelling place for Mrs Harris. This they described in their application to the planning authority as a "semi-contained" dwelling house.

Because of various planning requirements, into the detail of which it is unnecessary to enter, the Appellants required to incorporate a room of their own house to create the extension or "granny flat" attached to the building.

The construction involved the granny flat having a separate front door but the back door entered onto a conservatory into which the back door of the original house also entered. Accordingly both dwellings were attached to each other via the said conservatory out of which there was a single exit to the garden.

There was not incorporated any firewall between the two dwellings. Although electricity and gas were available in the granny flat they were metered as part of the house supply. The extension was not separately assessed for Council Tax.

Much discussion took place prior to the Hearing between the parties in correspondence about the significance of those factors.

However in their appeal the Appellants wrote to the Respondents as follows on 2 April 2004 when discussing whether the building could be classified as a dwelling:

"I would like to address the specific bullet points, in reference to the conditions to be satisfied for a building to be classed as a dwelling:

As can be seen from the enclosed plans, the dwelling is clearly a self-contained living accommodation.

As noted above, this second condition is satisfied, given that there is no provision for direct internal access from the dwelling to any other dwelling; only access via an external structure, as detailed above.

The separate use of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision.

As can be noted from the attached copy of the planning consent, there are no conditions restricting the separate disposal of the dwelling.

As requested, a copy of the planning permission granted by the local Planning Authority is attached. A Completion Certificate has previously been issued, to confirm that the works have been carried out in accordance with the Planning and Building Warrant consents."

What the applicant failed to disclose at that stage, although it was disclosed before the Tribunal, was that there was a covenant by way of an Agreement entered into under Section 75 of the Town and County Planning (Scotland) Act 1997 which was a pre-condition of the planning consent. That document was registered in the Land Register and affects the property. While it is true that the actual planning consent document itself does not mention it, it had no need to. The applicants were well aware that there were conditions restricting the separate disposal of the dwelling.

These conditions in the Section 75 Agreement were:

FIRST The occupancy of the granny flat to be erected by the Second Party shall be restricted in all time coming to a dependent relative of the Second Party.

SECOND The said granny flat shall be integrated with the existing house at 14 Willow Avenue aforesaid should use by the dependent relative cease.

THIRD The sale, lease or otherwise separate disposal of the said granny flat as a separate residential unit shall be prohibited in all time coming.

FOURTH The Second Party shall not transfer or assign their rights and obligations under this Agreement prior to the registration of this Agreement in the Land Register of Scotland.

The Respondents refused to allow the property to be zero rated which refusal was appealed by the Appellants.

The Statutory Framework

Parties are bound by the terms of VATA 1994 Section 30 Schedule 8 Group 5. Group 5 provides that there can be zero rated the first grant by a person constructing a building which was designed as a dwelling or a number of dwellings. However note (2)(c) accompanying that Group reads:

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.

A suggestion was made at the Hearing that the property might be subject to a reduced rate of tax under Schedule 7A but in order to be entitled to that reduction there are conditions and these conditions are the same as those in the above sub paragraph 2, see Group 6, 4(3)(c).

Decision

Whatever the merits of the argument about self containment or direct internal access the appeal is without merit by virtue of the terms of the Section 75 Agreement which prohibits the disposal of the newly created dwelling. That is fatal to the appeal by virtue of sub paragraph (c) quoted above. Had it been necessary to do so the Tribunal would have held that the arrangement of access and communication via the mutual conservatory was also contrary to sub paragraph (b). The appeal must therefore fail.

We do not wish to leave this matter however without acknowledging the efforts made by the Appellants to provide accommodation and care for a disabled person. It was evident from a letter from their General Practitioner that this effort has been worthwhile and successful. However the Appellants cannot show that the Tribunal has any discretion on the matter. The words of the statute are plain and arguments canvassed in correspondence and before the Tribunal about the Appellants being penalised for providing care for a relative by the fact that VAT requires to be paid on the construction, are of no relevance. As the applicant said the matter of planning was between him and the local authority. The matter of Value Added Tax is between him and Central Government who collect the proceeds.

We would further add that it was unfortunate that the terms of the Section 75 minute of Agreement appeared to have been either overlooked or not disclosed because the existence of that Agreement meant that the appeal never had any prospect of success.

T GORDON COUTTS, QC CHAIRMAN
RELEASE: 15 MARCH 2006

EDN/05/60