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TMI Blog2004 (2) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... d Nicholls of Birkenhead 1 My Lords, I have the misfortune to have reached a different conclusion from your Lordships. So I will set out my own views as shortly as possible. I agree that if the relevant statutory provisions are read literally the commissioners' case is unanswerable. Among the supplies zero-rated by the Value Added Tax Act 1994 as amended is the supply of services in the course of an approved alteration of a protected building. A protected building means (a) a building which (b) is designed to remain as or become a dwelling or number of dwellings and which, additionally, (c) is a listed building within the meaning of the Planning (Listed Buildings and Conservation Areas) Act 1990: see item 2 and note (1) in Group 6 in Schedule 8 to the 1994 Act. To satisfy condition (b), as I have labelled it, each dwelling must consist of self-contained living accommodation and meet the other conditions set out in note (2). 2 Section 1(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990 provides that a listed building is a building included in a list compiled or maintained by the Secretary of State and that any object or structure within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate the financial burden on the owners of listed buildings. This alleviation is confined to alterations, which in practice means improvements, as distinct from repairs or maintenance. The introduction of condition (b), as I have labelled it, added the separate dwelling requirement in 1989. But no one has been able to put forward any suggestion why it should matter if the alterations carried out to improve the dwelling house amenities are made to an existing outbuilding as distinct from the main building itself. 8 I decline to attribute to Parliament such a strange intention as is involved in the commissioners' case. A meaningful, purposeful interpretation is to be preferred. I agree with the approach of the Birmingham Value Added Tax tribunal. The key lies in recognising that the reference to a building in the singular in the definition of protected building in note 1 ( 'protected building' means a building . . . ) includes the plural buildings where appropriate. If the accommodation comprises self-contained living accommodation it matters not that, structurally, part of it is located in one building and part in another, so long as both buildings fall within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence was made in the second part of the definition, passed through the membrane of the word and and infected the meaning of the ordinary word building in the first part. In my opinion there is no ground for attributing such an intention to Parliament. The meaning of the first part of the definition is perfectly clear and I see no reason not to give building the ordinary meaning of the actual building to which the alterations are made. 12 A good deal of the argument was spent in examining other provisions of the 1994 Act, other statutes and other hypothetical facts to discover clues which might support or undermine the opposing constructions. But in my opinion the language is too clear to admit contradiction or need support from such tenuous inferences. The reasons why Parliament may have wished to narrow the scope of zero rating to buildings actually used as dwelling houses are convincingly explained by Etherton J in a judgment to which I would pay tribute for its clarity and comprehensiveness. 13 I would allow the appeal and restore the judge's order. Lord Hope of Craighead 14 My Lords, I have had the advantage of reading in draft the speech of my noble and le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d equally for the purposes of paragraph 2(c) of Schedule 1 to the General Rate Act 1967. The technique which was used in that case was to say that no rates were to be payable in respect of a hereditament for any period during which it ( the hereditament ) was included in a list complied or approved under section 54 of the 1971 Act. It was in that context that Lord Keith of Kinkel said, at p 404E-F, that it would be an absurd result, such as could not have been intended by Parliament, if a structure subject to building control by the 1971 Act were to be treated as not so subjected for the purpose of some other Act dealing with the consequences of listing. 18 The same could have been said if the definition with which we are concerned had provided that a building which was subject to building control as a listed building was a protected building. That would have amounted to a clear declaration that its treatment as a protected building was a consequence of listing. But the technique which the draftsman has used in note (1) is to direct the reader's attention instead to the building itself in the first instance. The context is that of the supply of goods and services, and the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not possibly be said to be designed to remain as or become a dwelling or a number of dwellings or to be intended for use solely for a relevant residential purpose or a relevant charitable purpose (see the definition of these expressions in notes (4) and (6) to Group 5 which are applied to Group 6 by note (3) to that Group). Here again it cannot be said that the definition of protected building in note (1) is dealing simply, in the case of scheduled monuments, with the consequences of the monument having been included in the schedule. The structure that is being reconstructed or altered must first be identified and the ordinary meaning of the word building must then be satisfied. It is only if it is satisfied and the other requirements in the definition are met that the question needs to be addressed as to whether the building in question is a scheduled monument. 21 The consequences of this approach to the definition may be to produce results which appear odd and unreasonable. The facts of the present case can perhaps be said to fall into that category. The house and the outbuilding are in the same occupation, they are occupied together as a single dwelling and bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any object or structure fixed to the building; (b) any object or structure within the curtilage of the building which, although not fixed to the building, forms part of the land and has done so since before 1 July 1948, shall be treated as part of the building. Your Lordships are therefore faced with one definition (that in the 1990 Act) which (at any rate in paragraph (b) of the tailpiece) introduces what the taxpayers acknowledge to be a statutory fiction; and a second definition (that in Value Added Tax Act 1994) which operates by reference to another statute dealing, not with any form of taxation, but with planning control. 24 The listed building to which the appeal relates is a dwelling-house known as The Mere at Little Houghton, Northamptonshire. The house and its immediate surroundings are described in some detail in the decision of the Birmingham VAT and Duties Tribunal (Chairman, Mrs J C Mitting). The description was repeated in the judgment of Etherton J on appeal [2001] STC 585, 587-589 and in the judgment of Aldous LJ on further appeal to the Court of Appeal [2002] STC 829, 831-3. At the outset of the litigation the details were important because there was an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity law) of this part of the VAT legislation. 27 The imposition of VAT in the United Kingdom is required by European Union legislation which has from the first aimed at the progressive harmonisation of member states' legislation on turnover taxes. There is a useful summary in the opinion of Advocate General Darmon in Commission of the European Communities v. United Kingdom (Case 416/85) [1990] 2 QB 130, 135-136, paras 1-4. EC Council Directives recognised that harmonisation would have to be a gradual process. In particular, article 28 (2) of EC Council Directive 77/388 of 17 May 1977 ( the Sixth Directive ) as amended by EEC Directive 92/77 permitted exemptions with refund of the tax paid (to which zero-rating was accepted as broadly equivalent) on a transitional basis for measures which were in force on 1 January 1991, were in accordance with Community law, and fell within the final indent of Article 17 of EC Council Directive 67/228 of 11 April 1967 ( the Second Directive ). That permitted such measures to be taken only for clearly defined social reasons and for the benefit of the final consumer . 28 The European background helps to explain the evolution of the VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anded note (2) which introduced the concept of a secondary building constructed in the garden or grounds of a main building. This disappeared in 1989. Since then the legislation has been consolidated in the VAT Act 1994, and some relatively minor amendments have been made, notably by the Value Added Tax (Protected Buildings) Order 1995 (SI 1995/283) (which substituted a new text for Group 6 but made few changes of substance). 31 I have already set out note (1) to Group 6 in Schedule 8 to VAT Act 1994. I must now put it in its context by setting out all the relevant parts of Group 6: GROUP 6-PROTECTED BUILDINGS Item No 1 The first grant by a person substantially reconstructing a protected building, of a major interest in, or in any part of, the building or its site. 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 a supervisory capacity. 3 The supply of building materials to a person to whom the supplier is supplying services within item 2 of this Group which include the incorporation of the materials into the building (or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' arguments have to some extent changed. There is therefore no discourtesy to the careful decision of the tribunal chairman, or to the full and clear judgment of Etherton J, if I proceed at once to the judgments in the Court of Appeal. Aldous LJ began with the commissioners' cross-appeal against the judge's rejection of their argument that the tailpiece to section 1(5) of the 1990 Act is not carried over into the VAT legislation. Aldous LJ dismissed this argument [2002] STC 829, 836, para 14, for the same brief reasons as the judge had dismissed it [2001] STC 585, 604, para 35: Note (1)(a) of Group 6 provides that an essential feature of a protected building is that it is a listed building 'within the meaning of' the 1990 Act. A listed building 'within the meaning of' the 1990 Act is a building which falls within the extended definition in section 1(5) of the 1990 Act. Rix LJ agreed (p 842, para 45), relying on note (10) (to which it will be necessary to return); and Tuckey LJ agreed with the whole of Rix LJ's reasoning (p 838, para 29). This point is therefore one of the few points on which there has been judicial unanimity. Nevertheless th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote (10), which is otherwise turned into a nonsense. The items and notes under Group 6 are careful to deal expressly with all or at any rate most of the essential questions which would clearly arise for the reader. The concept of a protected building is defined. The concept of substantial reconstruction (see item 1) is defined in note (4). An approved alteration is defined. Mere repair and maintenance is put on one side. Can there be apportionment where services are supplied in part for an approved alteration and in part for other purposes? Yes, see note (9). A definition of listed buildings is adopted which renders separate outbuildings part of the listed buildings themselves. In such circumstances, if the draftsman wished again to separate such outbuildings from the listed building for the purpose of requiring that each such outbuilding had to qualify as a dwelling by itself, when it never had to qualify as a listed building by itself but was an integral part of a listed building for all that it was physically separate, then I would have expected the notes to deal expressly with that requirement, just as they had at one time, albeit for different reasons not connected with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th statutory regimes prohibit unauthorised destruction or alteration of the listed or scheduled property, the prohibition being backed by criminal sanctions; and both contain provisions (that is the tailpiece to section 1(5) of the 1990 Act, and section 61(9) and (10) of the 1979 Act) which extend the scope of the prohibition beyond the actual listed building or scheduled building, structure or site. The general legislative purpose of both regimes is the protection of the national heritage, and the particular purpose of the extending provisions is to ensure that not only the heritage property itself, but also its fixtures and its environment, are protected. In Skerritts of Nottingham Ltd v. Secretary of State for the Environment, Transport and the Regions [2001] QB 59, for instance, section 1(5)(b) prevented the installation of plasticframed double glazing in a converted stable block which was not itself listed, but was within the curtilage of a mansion which Norman Shaw had built for W S Gilbert. 38 I return to the difference of opinion between Aldous LJ and Rix LJ. If the outcome of this appeal were to depend on a simple choice between a step by step approach and a holist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction. I can readily accept Rix LJ's view, at p 840, para 37 that the whole concept of a 'protected building' is suffused with the inherent idea that the building in question is either listed or scheduled . But the requirements that the subject-matter of the approved alteration should be (1) a building and (2) designed to become a dwelling, indicate that Parliament intended to give the benefit of item 2 of Group 6, not to the whole set of listed buildings and scheduled monuments (and structures or sites deemed to form part of them) but only to a subset (that is those which are buildings to be used for residential purposes). 42 That construction is to my mind much the most natural construction of the language of the statute. It is reinforced by considerations of legislative purpose. The Court of Appeal derived little assistance from the European dimension, but at least it shows that the example of an orangery (within the curtilage of a listed country house) altered so as to be used for commercial catering (which Rix LJ accepted, at p 844, para 52, with equanimity) is hard to reconcile with the social policy of promoting home ownership which the European Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aningless, and that Mr Lasok's explanation of it was fantastic. I have to say that (in common with Etherton J) I find note (10) unfathomable. I agree that it would make some sort of sense, although only in a strained manner, if the taxpayers' interpretation of note (2) were correct. But I am quite unpersuaded that this uncertain straw in the wind (and the other contextual straws on which Mr Walters relied) are sufficient to justify doing violence to the reasonably straightforward language of note (2). 45 In these circumstances I do not find it necessary to consider whether the section 1(5) point provides a simpler route to the result for which the commissioners contend. Their contention on this point faces a formidable obstacle in the form of the decision of this House in Debenhams Plc v. Westminster City Council [1987] AC 396, which (on unusual facts) concerned a reference in a rating statute (Schedule 1, para 2(c) to the General Rate Act 1976) to section 54 of the Town and Country Planning Act 1971 (section 54(9) being the predecessor of section 1(5) of the 1990 Act). Lord Keith (with whom all the House concurred on this point) said, at p 404: A large part of the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wimming pool which they constructed alongside it. 50 The Planning (Listed Buildings and Conservation Areas) Act 1990 provides by section 1(5): In this Act 'listed building' means a building which is for the time being included in a list compiled or approved by the Secretary of State under this section; and for the purposes of this Act (a) any object or structure fixed to the building; (b) any object or structure within the curtilage of the building which, although not fixed to the building, forms part of the land and has done so since before 1 July 1948, shall be treated as part of the building. 51 The outbuilding had formed part of the land since before 1 July 1948 so that it was to be treated as part of the building and so that authorisation was required (by other provisions of the 1990 Act) and duly obtained for its conversion. 52 Whether or not the supply of services here in question qualify for zero rating depends upon whether it falls within item 2 of Group 6 of Schedule 8 to the 1994 Act, namely as: The supply [of the relevant services] in the course of an approved alteration of a protected building. 53 It is necessary at this stage to read the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mean a building which was either a listed building or a scheduled monument within the meaning of the respective legislative provisions then applying. 57 Before that date all alterations to all buildings had been zero-rated, an exemption which the commissioners clearly came to regard as too generous once this House in Customs and Excise Comrs v. Viva Gas Appliances Ltd [1983] 1 WLR 1445, 1451 had decided that any work on the fabric of a building constituted its alteration except that which is so slight or trivial as to attract the application of the de minimis rule . 58 Group 8A was in turn restricted following the judgment of the European Court of Justice in Commission of the European Communities v. United Kingdom (Case 416/85) [1990] 2 QB 130 by an amendment effected by the Finance Act 1989 to confine zero-rating in the case of protected buildings to the reconstruction and alteration of certain defined classes of residential buildings. The wording of Group 6 today derives directly from the 1989 amendment. 59 Such being the history of this enactment it is the taxpayers' case, accepted by the majority below, that item 2 was intended to encompass anything constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it necessarily represents a core element of the taxpayers' argument. If, indeed, the alteration carried out in this case, although in a practical sense to the outbuilding , is more natural[ly] to be considered an alteration to the house, then clearly it is the alteration of a protected building and so attracts zero-rating. To my mind, however, there can be no escaping the plain fact that the actual building altered here was the outbuilding and not the house. True it is that the requirement for these works to be authorised rested upon the fact that, under the extended definition of listed building in section 1(5) of the 1990 Act, a listed building was being altered. That, however, appears to me an insufficient basis for ignoring the simple physical reality, namely that here it was the outbuilding itself which was being altered. It is to the actual work of alteration that item 2 is directed. Either the building which is itself being altered is a protected building as defined or it is not. Here it was not. 62 I have had the advantage of reading in draft the speech of my noble and learned friend Lord Walker of Gestingthorpe. I agree with it. 63 I too would allow this a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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