Customs and Excise v Tinsley

For VAT zero-rating of works to a protected building, the relevant question is what was physically altered. The works must be supplied in the course of altering a building which satisfies the cumulative requirements of the zero-rating provision, including that it is designed to remain as or become a dwelling and is a listed building. Works to a garden do not qualify merely because the garden adjoins or touches a listed dwelling. The assessment is fact-sensitive: substantial incorporation into, or alteration of, the building may produce a different result.

Her Majesty’s Customs and Excise appealed from a decision of the VAT Duties Tribunal dated 22 February 2002. The Tribunal had held that construction of a four-level terrace, wing-screen walls and associated garden works at the listed Narborough Hall was zero-rated.

The appeal concerned the proper application of item 2 of Group 6 of Schedule 8 to the VAT Act 1994, in light of the House of Lords decision in Customs and Excise Commissioners v Zielinski Baker and Partners Ltd [2004] UKHL 7. The central issue was whether the works altered the listed dwelling or merely altered the adjoining garden.

1. Appeal allowed. The Tribunal’s decision was reached on the wrong approach and the works did not qualify for zero-rating.
2. Item 2 of Group 6 of Schedule 8 to the VAT Act 1994 requires cumulative conditions to be satisfied. The services must be supplied in the course of an approved alteration of a building; the building must be designed to remain as or become a dwelling or dwellings; and it must be a listed building.
3. The decision in Customs and Excise Commissioners v Zielinski Baker and Partners Ltd [2004] UKHL 7 establishes the correct focus. The court must identify the building which was actually altered. The extended definition of listed building in section 1(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990 does not permit the physical subject of the works to be ignored.
4. Here, although the upper level of the terrace touched the side wall of Narborough Hall, the works altered the garden. The garden remained a garden and was not designed to remain as or become a dwelling. The cumulative requirements were therefore not met.
5. The result is fact-sensitive. Works carried out mainly in a garden may still qualify if they are sufficiently incorporated into, and alter, the relevant building. The Tribunal had failed to ask what the works altered. The correctness of the earlier Tribunal decisions in Powell (VTD 14520) and Mason (VTD 16250) was seriously in doubt following the House of Lords’ clarification.
6. There was no order for costs.

• VAT Duties Tribunal: On 22 February 2002, held that the terrace and associated works were zero-rated.
• High Court (Chancery Division): On appeal, held that the works altered the garden rather than the listed dwelling and allowed the appeal.