Greenspace (UK) Ltd v The Commissioners for HMRC

Reduced-rate VAT exceptions in Schedule 7A are interpreted strictly but not restrictively, by giving the statutory words their ordinary and fair meaning. Note 1(a) asks whether the supply is insulation for roofs. The inquiry is not a binary choice between insulation and a roof, nor a test of form over substance, substance over form, or a sliding scale. The nature and extent of the supply may help define the statutory expression. A product that both insulates and provides weatherproof protection is more than insulation for roofs and falls outside the reduced rate, even if most of its material is insulating.

Greenspace appealed to the Court of Appeal against the Upper Tribunal’s dismissal of its appeal from the First-tier Tribunal. The First-tier Tribunal had dismissed Greenspace’s challenge to VAT assessments totalling £2,581,092, and the Upper Tribunal had upheld that decision in [2021] UKUT 290 (TCC), following the First-tier Tribunal’s decision in [2020] UKFTT 349 (TC).

Greenspace supplied and installed insulated panels on existing conservatory roof structures and treated the supplies as qualifying for the reduced rate. The central issue was whether the supplies came within Note 1(a) to Group 2 of Schedule 7A to the Value Added Tax Act 1994 as “insulation for … roofs”.

1. Appeal dismissed. Lady Justice Whipple delivered the judgment, with which Lady Justice Falk and Lord Justice Peter Jackson agreed.
2. The reduced-rate provisions in Schedule 7A to the Value Added Tax Act 1994 are exceptions to the standard-rate rule. They must be interpreted strictly but not restrictively. The words must receive their ordinary and fair meaning. They must not be strained or construed so narrowly that the provision loses its intended effect. Note 1(a) asks whether the supply is insulation for roofs. A supply of something more than or different from insulation for roofs falls outside the reduced rate.
3. The reasoning in Pinevale Ltd v HMRC [2014] UKUT 204 (TCC) and Wetheralds Construction Ltd v HMRC [2018] UKUT 173 (TC) was largely sound and their outcomes were not doubted. However, the suggested binary choice between insulation for roofs and a roof itself went too far. The nature and extent of the supply may assist in identifying the limits of “insulation for roofs”, but there is no test of form over substance, substance over form, or a sliding scale. A pre-existing roof is not a necessary element.
4. The panels had insulating properties but also had a waterproof aluminium casing and protective coating. Those features protected the conservatory from the external elements and were fundamental characteristics of the product. The supplies therefore extended beyond insulation for roofs and did not qualify for the reduced rate. Fiscal neutrality did not require a different result because a weatherproofed panel was objectively different from insulation without that coating.
5. The First-tier Tribunal had applied the wrong legal test by asking whether the supplies were a roof. That was a material error, but correcting it produced only one possible outcome on the undisputed facts. The dismissal caused no injustice. Under the Civil Procedure Rules 1998 and the Tribunals, Courts and Enforcement Act 2007, the Court could alternatively have re-made the decision, but there was no reason to remit the matter.

• Court of Appeal (Civil Division) dismissed Greenspace’s appeal against the Upper Tribunal’s decision.
• Upper Tribunal Tax and Chancery Chamber dismissed the appeal from the First-tier Tribunal: [2021] UKUT 290 (TCC).
• First-tier Tribunal dismissed Greenspace’s appeal against the VAT assessments: [2020] UKFTT 349 (TC).