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The First-Tier tribunal (FTT) considered the case of CMJ (Aberdeen) Limited (CMJ) and whether the supply of building services in respect of the construction of a dwelling were correctly zero rated by the appellant. HMRC deemed that the construction services were standard rated on the basis that the works were not carried out in accordance with the terms of the relevant statutory planning consent.
Background
HMRC’s view was that, although planning consent was in place
at the time the construction services were supplied by the appellant, that
planning consent permitted only the alteration or enlargement of a dwelling and
did not allow for the construction of a dwelling. HMRC accept that the property
was constructed as a new building, but that this was not permitted by the
planning consent and so the construction was not carried out in accordance with
it.
CMJ contended that statutory planning consent had been
obtained for the construction via a combination of the planning consent and a
construction building warrant which it had obtained from the relevant authority,
and which allowed for the construction of a new building.
Legislation
The zero rating for the construction of new dwellings is
contained in The VAT Act 1994, Schedule 8, Group 5, item 2
“The supply in the course of the construction of
(a) a building designed as a dwelling…”
Note 2 to Group 5 of Schedule 8 to the VAT Act include the following:
“(2) A building is designed as a dwelling or a number of dwellings where in relation to each dwelling the following conditions are satisfied…
…(d) statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent.
Decision
The appeal was dismissed. It was judged that the building warrant did not comprise statutory
planning consent for the purposes of note 2 (d) because:
- Planning consent and building warrants operate under different statutory regimes.
- Breach of planning consent is dealt
with separately from a breach of the building warrant legislation, and each is
dealt with by the specific statutory regime . If there is a breach of planning
consent, it would not affect the validity of the building warrant, and vice
versa.
- The Building Standards Handbook states that the purpose of the building standards system is setting out the standards to be met when building work takes place. This is different from planning consent which is consent to allow the authority to permit development on a piece of land. They are distinct and separate regimes aimed at distinct and separate issues. While planning permission is about how the house will look, a building warrant is about whether it meets building standards.
- Both planning permission and
a building warrant is required. One is no substitute for the other.
- It is possible to obtain retrospective
planning consent, the judge did not believe it is possible to get a
retrospective building warrant.
It was not possible
to carry out works of construction in accordance with a valid statutory
consent, since no such consent had been given for construction at the time that
the building works were carried out.
Commentary
The legislation covering building work is complex and there
are many traps for the unwary. Even the seemingly straightforward matter of
whether a new dwelling is constructed can produce difficulties, as in this
case. We always counsel that proper VAT advice is sought in such circumstances.