20640
VAT – ASSESSMENT - ZERO RATING – Appellant supplied services of installing slab mirrors – were those services supplied in the course of an approved alteration to protected buildings – yes – Appeal allowed
MANCHESTER TRIBUNAL CENTRE
CHAMELON MIRRORS LIMITED Appellant
- and -
HER MAJESTY'S REVENUE and CUSTOMS Respondents
Tribunal: MICHAEL TILDESLEY OBE (Chairman)
ROLAND PRESHO FCMA (Member)
Sitting in public in North Shields on 29 January 2008
Philip Fieldsend, managing director for the Appellant
Julian Winkley the Solicitor's Office for HM Revenue & Customs, for the Respondents
© CROWN COPYRIGHT 2008
DECISION
The Appeal
- The Appellant was appealing against a notice of assessment in the sum of £2,357 dated 19 January 2007.
- The dispute related to a sum of £775.75 plus interest, the VAT on a supply involving the fitting of slab mirrors which the Appellant had treated as a zero-rated supply.
- The issue was whether the Appellant could avail itself of the zero-rating provisions under group 6 schedule 8 of the VAT Act 1994, which concerned supplies made in the course of an approved alteration of a protected building.
The Law
- Group 6 schedule 8 of the VAT Act 1994 provides so far as was relevant to this Appeal as follows:
Item No
2 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 any supervisory capacity.
3 The supply of building materials to a person to whom the supplier is supplying services within item 2 which include the incorporation of the materials into the building (or its site) in question.
Notes
3 Building materials …. means goods of a description ordinarily incorporated by builders in a building of that description ……. the incorporation of goods in a building includes their installation as fittings.
6 Approved alteration …… 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.
The Evidence
- We heard evidence from Mr Fieldsend for the Appellant. The statement of Julie Harker, the assessing officer, was admitted in evidence. The Respondents supplied a bundle of documents.
The Facts
- The Appellant acted as a sub-contractor for Northern Property Developments Limited which converted offices into 14 five/six bedroom dwelling houses with double garages located in Jesmond Road West, Newcastle. This was a prestigious development which involved the restoration of Georgian buildings to their former splendour. The development received listed building consent on 17 August 2001 and 5 February 2003. The terms of the consent extended to internal features of the buildings.
- The Respondents accepted that the properties in Jesmond Road West were protected buildings within the meaning of group 6 schedule 8 of the VAT Act 1994.
- The Appellant's supplies to Northern Property Developments Limited comprised the delivery and installation of slab mirrors in the protected buildings. The Appellant fitted on average eight slab mirrors in each of the properties in Jesmond Road West, principally in the bathrooms, en suites and changing room areas. A slab mirror was not the same as a decorative mirror. It was similar to a mirror tile but much larger. The Appellant affixed the slab mirrors to walls with a mastic. The slab mirrors once affixed could not be removed from the fabric of the building except by breaking them and damaging the plasterwork. Before installing the mirrors, the Appellant measured the spaces where the mirrors were to be located in the buildings. Armed with the measurements the Appellant made up the slab mirrors and affixed them to the walls of the various properties with a surround of tiles.
- Following the assessment against the Appellant, Northern Property Developments Limited refused to reimburse the Appellant with the VAT assessed on its supplies. Northern Property Developments Limited considered the supplies in connection with the development of Jesmond Road West to be zero-rated. Apparently none of their other sub-contractors had been required to pay VAT on their supplies in relation to the Jesmond Road West properties.
The Appellant's Representations
- The Appellant considered that it had been singled out unfairly by the Respondents. According to the Appellant all supplies made in connection with the renovation of the Jesmond Road West properties had been zero-rated, including the fitting of carpets and tiling of various rooms. The Appellant submitted that slab mirrors were building materials. They were permanently fixed to the building and not the same as decorative mirrors which could be easily removed.
The Respondents' Representations
- The Respondents conceded for the purposes of this Appeal that the Appellant's supplies were either a single supply of services (within which any potential separate supply of goods, the mirrors, was subsumed) or two separate supplies, one of goods, the mirrors, and one of services, fitting the mirrors.
- The Respondents submitted that item 2 group 6 schedule 8 of the VAT Act 1994 did not apply because the services supplied by the Appellant were not an alteration. The services supplied in relation to the mirrors did not involve substantial works to and affecting the fabric of the building. The Respondents derived their submission from the House of Lords decision in Act Construction Limited v Customs and Excise Commissioners [1982] STC 25 which considered the meaning of alteration in item 2 group 8 schedule 4 of the Finance Act 1972. The House of Lords held that alteration must be a structural alteration, and it must not be any work of repair or maintenance. The Respondents also considered that the VAT and Duties Tribunal decision in Rosemary Irving Contracts (1997) VAT Decision Number 15188 supported their proposition that alteration meant substantial works.
- The Respondents contended that item 3 group 6 schedule 8 of the VAT Act 1994 only applied if the Appellant was making two discrete supplies of goods and services, and the separate supply of services fell within item 2 group 6. Further, even if the Appellant overcame these two hurdles the supply of slab mirrors did not constitute building materials. The mirrors were not materials ordinarily incorporated into a building by builders.
- The Respondents concluded from their analysis that the Appellant's supplies did not fall within group 6 schedule 8 of the VAT Act 1994. In their view the Appeal should be dismissed and the assessments confirmed.
Reasons
- The first issue to decide was whether the Appellant's supplies were either a single supply of services or two separate supplies of goods and services. The Respondents in their skeleton argument did not take the point that the Appellant's supplies were one of goods alone. We find on balance that the Appellant was supplying a single supply of services, namely, the installation of slab mirrors. We placed weight on the Appellant's evidence that it was required to measure the spaces designed for the mirrors and then fit them with a surround of wall tiles. This was not a case of the principal contractor providing the measurements, and requiring the Appellant to supply and install specified sizes of slab mirrors.
- In view of our finding in paragraph 15 the dispute between the parties was restricted to whether item 2 group 6 schedule 8 of the VAT Act 1994 applied to the Appellant's supplies. Thus the question for decision was whether the Appellant supplied its services in the course of an approved alteration of a protected building of any services. We find that the properties on Jesmond Road West were protected buildings and the works carried out on them had listed building consent which satisfied the meaning of approved alteration in note 6 to group 6 schedule 8 of the VAT Act 1994. The dispute, therefore, was whether the installation of slab mirrors could properly be described as an alteration. In the Respondents' view the works carried out by the Appellant were not substantial and amounted to redecoration rather than alteration. The works were in effect maintenance which was specifically excluded from the definition of alteration by note 6.
- We consider the Respondents' approach flawed. They considered the Appellant's supplies in isolation rather than in the context of the development of the Jesmond Road West properties as a whole. The operative words of item 2 are whether the Appellant's supplies were made in the course of an approved alteration of a protected building. The High Court decisions in Parochial Church Council of St Luke v Customs and Excise Commissioners [1982] STC 856 and Customs and Excise Commissioners v Morrish [1998] STC 954 which followed the House of Lords decision in Act Construction Limited give support for the proposition that the starting point was the nature of the development as a whole. Moses J (as he then was) summed up the proposition at 958:
"Under the same Act, Woolf J (as he then was) in Parochial Church Council of St Luke v Customs and Excise Comrs [1982] STC 856 had to consider a church which was seriously damaged by fire, and whether work to reconstruct the roof amounted to works of repair or maintenance. The case is authority for the following propositions. (1) The question will primarily depend upon what is happening to the building as a whole (at 861). (2) The tax treatment of items of work undertaken, which might be described as integral to the whole of a larger project will follow the tax treatment of that larger project; thus if rooms are redecorated in the course of alteration of an existing building that redecoration will form part of the alteration".
- The Appellant supplied evidence of the listed building consent for the Jesmond Road West properties and of the substantial alterations to the buildings. Further Northern Property Developments Limited advised the Appellant that its supplies were exempt from VAT. The Respondents did not challenge this evidence. We are satisfied on balance that the tax treatment of the alterations to the Jesmond Road West properties as a whole was zero rated. In those circumstances the remaining question for determination is whether the Appellant's supplies were integral to the whole of the Jesmond Road West development.
- We find that the Appellant's supplies of installing slab mirrors to the Jesmond Road West properties constituted permanent features which effectively formed part of the fabric of the buildings and very much in keeping with restoring the Georgian buildings to their former glory. They were not mirrors as usually understood as pieces of furniture that could be re-arranged and moved around the property. We are, therefore, satisfied that the Appellant's supplies of installing slab mirrors were made in the course of the approved alterations of the Jesmond Road West properties.
Decisions
- For the reasons give above we find that the Appellant's supplies of installing slab mirrors to Northern Property Developments Limited were zero rated by virtue of item 2 group 6 schedule 8 of the VAT Act 1994. We, therefore, allow the Appeal and reduce the assessment dated 19 January 2007 by the disputed amount of £775.75 plus interest. The Appellant did not seek its costs in connection with the Appeal. In those circumstances we make no order for costs.
MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 1 April 2008
MAN/
