2004 (2) TMI 670 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Statutory interpretation of the term "protected building" under the Value Added Tax Act 1994.
2. Application of the definition of "listed building" from the Planning (Listed Buildings and Conservation Areas) Act 1990.
3. Whether the alterations to an outbuilding within the curtilage of a listed building qualify for zero-rating under the VAT Act.

Detailed Analysis:

Statutory Interpretation of "Protected Building":
The primary issue revolves around the interpretation of "protected building" under the Value Added Tax Act 1994. The term is defined to include buildings designed to remain as or become dwellings and which are listed buildings within the meaning of the Planning (Listed Buildings and Conservation Areas) Act 1990.

Lord Nicholls dissented, arguing that the literal interpretation of the statutory provisions leads to absurd results. He emphasized that the social purpose of the VAT Act was to alleviate the financial burden on owners of listed buildings. He argued for a purposeful interpretation, suggesting that the term "a building" should include multiple buildings within the curtilage of a listed building. Thus, he would dismiss the appeal, favoring the taxpayer's interpretation.

Application of the Definition of "Listed Building":
The definition of "listed building" under section 1(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990 includes any structure within the curtilage of the building if it has been part of the land since before 1 July 1948.

Lord Hoffmann and the majority disagreed with the holistic approach of the Court of Appeal. They argued that the statutory requirements are cumulative and must be read step-by-step. The outbuilding was not designed to remain as or become a dwelling, thus failing the first part of the definition. Therefore, the alterations did not qualify for zero-rating.

Alterations to an Outbuilding:
The alterations in question involved converting an outbuilding into games and changing facilities and constructing an indoor swimming pool. The key issue was whether these alterations to an outbuilding, which is within the curtilage of a listed building, qualify for zero-rating under the VAT Act.

Lord Hope and Lord Walker emphasized that the statutory definition of "protected building" requires the building to be designed to remain as or become a dwelling. They concluded that the outbuilding, not being designed to become a dwelling, did not meet this requirement. Consequently, the alterations did not qualify for zero-rating.

Lord Walker elaborated that the statutory fiction in section 1(5) of the 1990 Act does not extend to altering the natural meaning of "a building" in the VAT Act. He highlighted that the legislative purpose was to focus on buildings intended for residential use, reinforcing the commissioners' interpretation.

Conclusion:
The House of Lords allowed the appeal, restoring the order of Etherton J. They concluded that the alterations to the outbuilding did not qualify for zero-rating as it was not designed to remain as or become a dwelling. The commissioners' interpretation of the statutory provisions was upheld, emphasizing a step-by-step approach to statutory construction and rejecting the holistic approach favored by the Court of Appeal. The taxpayers' costs in the House were awarded in accordance with the terms on which leave to appeal was granted.