Monthly Archives: June 2014

Social property introduction – VAT followed

When liability to VAT is dependent on a service being provided “in the course of a business conducted” by the service provider, Tribunals and Courts are required to give a very broad meaning to the notion that the service must be rendered in the course of a business.

The cases suggest seven features to be considered in assessing whether supplies were made in the course of business:

1. whether there was a serious undertaking earnestly pursued;

2. whether there was a serious occupation, not necessarily confined to commercial or profit-making undertakings;

3. whether the activity was an occupation or function actively pursued with reasonable or recognisable continuity;

4. whether the activity had a degree of substance as measured by the quarterly or annual value of taxable supplies made;

5. whether the activity was conducted in a regular manner and on sound and recognised business principles;

6. whether the activity was mainly concerned with the making of taxable supplies to consumers for a return; and

7. whether the taxable supplies were of a kind which, subject to differences of detail, are commonly made by those who seek to profit by them.

The First-tier Tribunal (Tax) case of Spencer -Churchill v Revenue & Customs [2014] concerned mainly whether a supply of a service by the Appellant, consisting of assisting the vendor of very valuable London house sell it, was a service made “in the course of a business” run by the Appellant.

Before the house was formally offered for sale, the Appellant knew that the owner, Mr. Lyons, wished to sell the house, and the Appellant had dinner at Scott’s of Mayfair with both Mr. Lyons and a man, the Appellant had recently been introduced to, called Jean Luc (“Jean Luc”). A wealthy Russian, Mr. Andre Goncharenko (“Mr. Goncharenko”) was looking to purchase a very substantial house in London, and Jean Luc knew Mr. Goncharenko. Mr. Goncharenko was dining at the same restaurant. Mr. Lyons and Jean Luc spoke to Mr. Goncharenko and indicated that Lyndhurst Road was available to purchase. Mr. Goncharenko had apparently seen the house and offered to purchase it for £43 million.

Various agents became involved and even though some of the others hadn’t produced the sale the Appellant arranged the division of the agreed fee so that Aylesfords, Knight Frank, Jean Luc and the Appellant were all to receive £125,000 each.

A question later arose whether the appellant should have accounted to HMRC for VAT on his receipt.

The Tribunal found that there had clearly been some deal between Mr. Lyons and the Appellant, dating right back to November 2009 at least, in which it was implicit that the Appellant would perform some introductory role in relation to the sale of the property, and that if the Appellant’s role did result in a sale, then the Appellant would be entitled to a substantial cash payment.

Technical legal questions as to whether there was sufficient certainty as to the terms of the handshake deal to establish an enforceable contract at law did not matter. Clearly for VAT purposes the Appellant rendered a service to Mr. Lyons, for which he was to be remunerated whether or not that service was intended to be remunerated from the outset.

Going back to the tests at paragraphs 1-7 above, some were satisfied and others (mainly continuity) were not. The main distinguishing factor in this case was that the activity did appear to have been pursued quite deliberately from at least November 2009 in a commercial and “business-like” manner. Significant also was the early indication by Mr. Lyons that the Appellant should receive a fee for his services, and e-mails seen which suggested that the Appellant and one of the agents were competing jointly to preserve their fee expectations.

It was not only the other Agents who were competing for the entitlement to receive fees, leaving the Appellant to receive a gratuity. The Appellant was involved in the fee battle involving the others.

The wide meaning to be given to the notion of “business” meant that there should be a liability to VAT where any supplies are made in “an economic activity”. So the tests at 1-7 above could be satisfied even if the business encompassed only the one activity, if the activity had been conducted in an entirely business-like manner.

All the other parties were plainly acting in the course of business, and all would have been accounting for VAT. That made it odd to suppose that the Appellant alone was not conducting an economic activity. It could not be said that the Appellant’s activity had been merely in the course of “social engagements” or pleasure.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Flat within same building succumbing to neighbouring house extension qualified for reduced VAT

In the First Tier Tribunal (Tax Chamber) case of Nabarro v Revenue & Customs [2014] construction work had been undertaken during 2012 by Charlie Laing Limited for Mr David Nabarro.

The building work involved the demolition of a self-contained “granny flat” at 21A Priory Close (the “Flat”) and its replacement by the addition of a two storeys to 21 Priory Close (the “House”). Though there had been no means of direct internal access from the House to the Flat they were connected by the wall of a garage which had been attached to the House but was also demolished as part of the construction work.

The Flat and House had also been linked by an open area covered by a corrugated plastic roof on timber joists which, like the wall was attached to both buildings. Before the Flat’s demolition, the utilities for the Flat were routed from and billed to the House. However, the Flat and the House were treated separately for council tax and allocated different bands by the London Borough of Barnet, the House being in “Band G” and Flat being in “Band A”.

Also nothing in the earlier planning permission restricted the separate use or disposal of the Flat.

HM Revenue and Customs said the builder, Charlie Laing Limited, should have charged Mr Nabarro VAT at the standard rate, as an extension to his existing building, instead of the reduced rate of 5% which would have applied had the work been a “qualifying conversion”. Whether it was a qualifying conversion, in turn, depended on whether, before the work commenced:

– the House and Flat were separate dwellings contained in one building, or

– were one dwelling comprised of two buildings.

Clearly if there were a single dwelling before and after the construction work it could not have been a “changed number of dwellings conversion” within Note 3(2) to Group 6 of schedule 7A Value Added Tax Act 1994 (“VATA”). Similarly if there had been two buildings before the conversion it could not have been “the conversion of premises consisting of a building within Note 3(1)(a) to Group 6 of schedule 7A VATA.

The Tribunal found that the House and Flat were separate dwellings.

Not only did each have its own postal address but each had been allocated different council tax bands and treated separately for council tax purposes by Barnet Council which was required to levy and collect council tax “in respect of dwellings”.

The provision of utilities for the Flat routed from and billed to the House was not decisive.

The fact that the Flat and House had been connected by a garage wall and an open area covered by a corrugated plastic roof on timber joists were not of a nature on their own sufficient physical links for the Flat and House to be regarded as one building.

Therefore there had been two dwellings before the conversion and one after it had been completed. Although the House and Flat were separate dwellings they were within the same single building. Therefore the conditions of Note 3 Group 6 of schedule 7A VATA were satisfied and the work undertaken by Charlie Laing Limited for Mr Nabarro was a “qualifying conversion” within Note 2 to Group 6 of schedule 7A VATA, for which VAT was correctly charged at 5%.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Planning officers have reasonable scope to determine the extent of their own enquiries

Some cases turn on criticism of a planning officer’s report to a Planning Committee. The relevant legal principles may be extrapolated from them as follows:

1. A report is addressed only to council members, who may be expected to have substantial local and background knowledge including local development plan polices.

2. The report need not set out development plan policies as it is reasonable to anticipate that the members will be familiar with them.

3. The report should not contain too much or unnecessary detail.

4. Reports do not (and should not) seek to be exhaustive.

5. The report by a planning officer is not intended to provide a learned disquisition of relevant legal principles or to repeat each and every detail of the relevant facts to members of the committee. The committee members are responsible for the decision and are entitled to use their local knowledge in reaching it.

6. The report should not be subjected to textual analysis analogous to the interpretation of a statute or a judge’s summing up directions to a jury.

7. The courts should not impose too demanding a standard upon planning officers’ reports, for otherwise their whole purpose will be defeated.

8. An application for judicial review based on criticisms of a planning officer’s report will not normally gain any traction unless the overall effect of the report significantly misled the committee about material matters which were then left uncorrected at the meeting of the Planning Committee in advance of the relevant decision being taken.

9. It is the task of the Council, and not the court’s, to weigh the competing public and private interests involved in arriving at a planning decision.

In Hayes, R (on the application of) v Wychavon District Council & Anor [2014] the Claimant applied to the High Court for judicial review of the Defendant’s to grant planning permission for “the erection of an agricultural building for goats, chickens and tractor/equipment storage”.

The Claimant lived near the site and believed that he and his neighbours would be adversely affected by it.

One of the challenge grounds was that the Defendant’s planning officer failed to make sufficient inquiries, meaning the officer’s report was deficient and so the Defendant’s later decision was unsupported by evidence, unlawful and irrational.

The application of the above principles to this case had to be modified to some extent because the decision was made by a senior planning officer exercising delegated authority, not by the Planning Committee.

Here the planning officer submitted her report recommending approval to the senior planning officer, who made the decision. The High Court said he had been entrusted by the Council, to weigh the competing public and private interests and make the required planning judgments. He had knowledge of the relevant planning law and policy and so it was not necessary to set these out in the report. He also had the benefit of local knowledge, and some previous knowledge in relation to this particular application. So it was not necessary for the planning officer’s report to set out every detail relating to the application and the site. However, the planning officer who prepared the report was still responsible for ensuring that the report did not overall significantly mislead him on material issues.

A planning authority (via its planning officer) must take all reasonable steps to acquaint itself with the information relevant to making a correct decision. Plainly the scope and content of the duty would vary according to the context.

A public body is entitled to decide upon the extent of the inquiry, the court has only a supervisory jurisdiction. It is for the decision-maker and not the court, to decide upon the manner and intensity of inquiry to be undertaken into any relevant factor.

Where it is alleged that the planning authority failed in its duty to make sufficient inquiry, the question to be asked is whether the inquiry made by the planning authority was so inadequate that no reasonable planning authority could suppose that it had sufficient material available upon which to make its decision to grant planning permission and impose conditions. That is a clear application of the governing public law principles in the Wednesbury case.

On the facts sufficient enquiry had been made.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Design subcontractor did not undertake duty of care to ultimate employer

The use of design and build contracts in construction projects prompts one to consider whether a construction professional appointed by the design and build contractor owes a duty of care to avoid causing economic loss to the employer. A claim like that will rarely succeed.

The existence of a contractual chain which has been structured so as to exclude a contract between claimant and defendant will often prove inconsistent with such a duty of care.

In the leading case authority on this, that principle was applied to the sub-contractor who provides work or materials in the construction of a building, and not to professionals.

Nevertheless that principle is equally applicable to sub-contracted design professionals as it is to sub-contracted suppliers of work and materials.

A claim in tort against a building professional who is not in a contractual relationship with the Claimant requires the existence of a special relationship of proximity as the basis for the existence of a relevant duty of care.

The challenge for an employer will be to identify facts which justify the conclusion that there has been an assumption of responsibility towards it by a design professional.

If sub-contracted work or materials do not in the result conform to the required standard, it will not ordinarily be possible for the building owner to sue the sub-contractor or supplier direct as there is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their contractual relationships in a way that is inconsistent with any such assumption of responsibility.

In Sainsbury’s Supermarkets Ltd v Condek Holdings Ltd & Ors [2014] Sainsbury’s claimed it was owed a duty of care by NRM, on the basis that:

– the now defunct main contractor, Condek, procured services from NRM to design or assist in the design of the works. Indeed NRM’s design formed part of Condek’s tender for the works which was provided by Condek to Sainsbury’s.

– NRM was required to undertake structural inspections of the works during the course of the installation and undertook maintenance inspections for a period of 2 years after the completion of the works.

– Before Sainsbury’s decided to contract with Condek, NRM attended various meetings with both Condek and Sainsbury’s and provided design advice and assurances, which Sainsbury’s relied upon when deciding to go with Condek system.

– NRM was aware that Condek was going to use the Condek’s scheme at it’s North Cheam store and that Sainsbury’s relied upon NRM’s advice and input at the various meetings both prior to entering into the Contract and during the Works.

– NRM should have checked and reviewed the design and taken steps to ensure that the car park was appropriately designed and installed in accordance with a reasonably competent design but failed to do so.

Sainsbury’s said they had been reliant upon NRM exercising reasonable skill and care in carrying out and reviewing the design of the Condek system. So NRM owed Sainsbury’s a duty of care in tort to carry out the works, exercising the degree of skill and care expected of a reasonable competent designer. In particular it was incumbent upon NRM to ensure that its design for the works was such that when the works were constructed and installed the works were (a) appropriately designed for an external environment; (b) appropriately designed to cater for traffic; (c) safe for use by Sainsbury’s and its customers’ resistant to corrosion or other degradation; (d) did not give rise to excessive movement and noise; and (f) were of good and durable quality (durability being required for between 15 years to 50 years).

The car park was negligently designed and there were defects.

Two of the defendants now sought to get Sainsbury’s claim struck out as disclosing no proper basis of claim and for summary judgement in their favour.

The High Court concluded that no duty of care would have been owed by NRM to Sainsbury’s unless Sainsbury’s could show reasonable reliance by Sainsbury’s and knowledge on the part of NRM that Sainsbury’s would rely upon its expertise and advice.

The court said Sainsbury’s had failed to specify the scope of the relevant duty with precision so that it may be understood by others i.e. whether and to what extent NRM knew that Sainsbury’s (as opposed to the main contractor Condek) relied upon its work. Nor had they established the direct interaction between NRM and Sainsbury’s or any other facts from which one could reasonably infer an assumption of responsibility by NRM to Sainsbury’s or the existence between them of a special relationship of proximity.

The most that Sainsbury’s said was that Sainsbury’s “was reliant on” NRM exercising its skill and care in reviewing the design of the car park and in providing its services to Condek in the course of installation of the car park.

So Sainsbury’s case disclosed no legally admissible basis for the imposition of a duty of care on NRM.

Also Sainsbury’s had put forward no coherent basis on which anyone could reasonably infer the unjustifiably broad scope of duty they alleged above.

Sainsbury’s had pleaded only 2 facts that tended to support a possible duty of care owed by NRM to Sainsbury’s.

1. NRM’s report was annexed to Condek’s tender. Where: (a) this was done with NRM’s knowledge and (b) with NRM knowing that the purpose of annexing it was to validate the design of the car park so that Sainsbury’s would accept it, then that could be taken as evidence of an assumption of responsibility by NRM towards Sainsbury’s. However it had neither been pleaded nor shown that NRM would have known that Sainsbury’s would rely upon its report and that Sainsbury’s would not rely upon alternative expertise – if indeed that was the case.

2. NRM attending meetings and dealing with technical questions that were raised. As things stood this had been inadequately pleaded or evidenced by Sainsbury’s. In particular, nothing had been put forward as to the scope of the questions that were asked of NRM, by whom the questions were asked, or the scope of NRM’s advice in reply. However, in principle, a sub-contractor’s active involvement in meetings at which the employer was present could support the existence of an assumption of responsibility by that sub-contractor towards the employer, though it will not necessarily do so.

So Sainsbury’s pleadings did not presently disclose a sufficient basis for a finding that NRM owed a duty of care to Sainsbury’s

The court therefore struck out Sainsbury’s pleading that NRM owed a duty of care to Sainsbury’s and granted summary judgment on the issue.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Mobile homes not dwellings replaceable by houses in green belt

To the extent that replacements for buildings are permitted in the green belt does this extend to permanent buildings providing replacements for caravans and other mobile homes?

You would have thought this was pushing things a bit and you would be right.

In Lloyd & Anor v Secretary of State for Communities And Local Government & Anor [2014] the applicant appealed against a refusal of its challenge, under section 288 of the Town and Country Planning Act 1990 (“the Act”), to an unsuccessful planning appeal.

The applicant sought permission to retain a “replacement dwelling” on green belt land at Doone Brae Farm, Windmill Road, Pepperstock in Hertfordshire.

The “replacement dwelling” was, in fact, a Canadian log cabin, which had, in 2003, replaced a mobile home that was stationed on the site.

Despite a number of attempts, the log cabin did not have planning permission.

The Court of Appeal found the Council’s Local Plan to be consistent with the National Planning Policy Framework (“the Framework”) on Green Belt.

The Framework’s main policy dispensation (Policy 89) related to replacement for buildings, given their ordinary and natural meaning, and did not include replacements for caravans or other mobile homes.

The purpose of Policy 89 was to set out the exceptions to the general rule that “the construction of new buildings” is inappropriate development in the green belt. A building is something that is constructed on a site. It does not include a moveable structure that was constructed off site and merely assembled and stationed on a site.

It was plain that references to dwellings in the policy exceptions to green belt protection could only be permitting replacements to dwellings which had been buildings or houses and not caravans or other mobile homes.

Had the appellant been correct it would have undermined the protection afforded to the green belt because it would have permitted the replacement of moveable, non-permanent structures with permanent buildings.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Variation of planning condition ignored material considerations

Section 101 of the Local Government Act 1972 (“the 1972 Act”) empowers a local authority to make arrangements for the discharge of its functions by committees, sub-committees or officers.

In Pemberton International Ltd v London Borough of Lambeth & Anor [2014] the Defendant, the local planning authority, varied a condition attached to a previous planning permission which originally provided that there was to be no outdoor seating for a London restaurant, neighbouring residences, without the prior written permission of the authority.

The Claimant sought judicial review of the variation of that condition on the grounds firstly, that the decision was taken in breach of the Defendant’s scheme of delegation and so was ultra vires, and secondly, that there had been a failure to have regard to a material consideration namely the previous in principle objection to outdoor seating.

The Planning Court said a Council may delegate under Section 101 of the 1972 Act by arranging for the function to be exercised by a committee, a sub-committee or an officer. Under Section 101(2) where a committee or sub-committee is authorised to discharge a function, it may itself decide to arrange for the exercise of the function by an officer. But if the Council has arranged for a function to be exercised by a particular officer or officers, section 101 of the 1972 Act does not itself permit those officers to sub-delegate the carrying out of the function to other officers.

The Council had adopted a Constitution. Section 10.1 of Part 1 recognised that the Council would appoint a planning applications committee to discharge the functions, powers and duties of the Council in relation to planning and development control matters.

Section 1 of Part 2 of the Constitution set out the functions of particular committees the planning applications committee. However that section did not, of itself, deal with which officers apart from the Divisional Director Planning or Head of Development Control, were authorised to take the planning decisions.

But section 4 of Part 2 of the Constitution dealt with the scheme of delegation and the authorisation of officers and appeared to recognise two separate sources for officials to be authorised. First, there was a system whereby the Executive Director may in writing authorise anyone he chose. The court reserved its position on the lawfulness of that provision or its compatibility with section 101 of the 1972 Act as it was irrelevant here.

The second was the authorisation of particular directors to undertake particular functions including the authorisation of the Divisional Director (Planning, Regeneration and Enterprise) to make planning decisions. Here the Divisional Director was authorised under section 4(e)(3) to make the relevant decision. Under note 4, an officer authorised or nominated by that Director, and who reported to or was responsible to that Director, could also exercise the power to make the relevant decision. Here the Divisional Director (Planning, Regeneration and Enterprise) had by a document nominated or authorised a number of planning officers to take decisions.

So long as the scheme as a whole either identified the officers, or set out the machinery by which the officers authorised to exercise certain functions could be identified, the scheme would accord with section 101 of the 1972 Act.

Here a certain group of officers were authorised to exercise planning functions. Those officers were the Divisional Director and those officers who reported to, or were responsible to, the Divisional Director so long as the Divisional Director had approved them for that purpose.

The scheme did not empower the Divisional Director to sub-delegate powers given to her. The scheme itself authorised a group of officers, the Divisional Director and those under her direct control, to exercise planning functions provided that the Divisional Director approved those subordinates for that task.

Here the relevant officer was one of the officers authorised by the scheme of delegation to act. She reported to, or was responsible to the Divisional Director and she had been approved by the Divisional Director for the purpose of exercising the relevant functions. As such, that officer was authorised by the scheme of delegation to take that particular decision and it was not outside the powers of Section 101 of the 1972 Act.

However the Defendant had indeed failed to take into account a material consideration, namely complaints that had been made during the currency of a previous temporary permission, before it decided to grant a permanent varied condition permitting external seating. In those circumstances, the variation to the planning permission had to be quashed.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Planning committee gave insufficient weight to harm to Listed Buildings and Conservation Area

In The Forge Field Society & Ors, R (On the Application Of) v Sevenoaks District Council [2014] the Council faced judicial review of its decision to grant planning permission for affordable housing in Penshurst a village in the High Weald Area of Outstanding Natural Beauty and the Metropolitan Green Belt. Affected by this was Forge Field, about a third of a hectare of rough grassland, sloping down from the High Street. It was in the Penshurst Conservation Area, within the settings of Star House, a grade II* listed building erected in 1610, and Forge Garage, a building in the Arts and Crafts style, listed at grade II.

The High Court said sections 66 and 72 of the Listed Buildings Act did not allow a local planning authority to treat the desirability of preserving the settings of listed buildings and the character and appearance of conservation areas as mere material considerations to which they can attach as much weight as they see fit.

An authority’s assessment of likely harm to the setting of a listed building or to a conservation area was a matter for its own planning judgment. But when an authority finds that a proposed development would harm the setting of a listed building or the character or appearance of a conservation area, it must give that harm considerable importance and weight.

A finding of harm to the setting of a listed building or to a conservation area gives rise to a strong presumption against the grant of planning permission. The presumption is a statutory one. It is not irrebuttable. It can be outweighed by powerful enough material considerations.

But an authority can only appropriately strike the balance between harm to a heritage asset on the one hand and planning benefits on the other if it is conscious of the statutory presumption in favour of preservation and if it demonstrably applies that presumption to the proposal it is considering.

It was clear from the final sentence of paragraph 166 of the planning committee report, that the planning officer, reporting to the Council’s planning committee, weighed benefit against harm without considering whether the benefit was sufficient to outweigh the strong presumption against planning permission being granted.

It would have been open to the Council to conclude that, in spite of the statutory presumption in sections 66 and 72 of the Listed Buildings Act, the policy presumption in Policy SP4 should in this case prevail. Indeed the officer tested the impact on heritage assets by the test of “overriding” harm in Policy SP4(c).

However the reference in that policy to “overriding … conservation … impacts” did not weaken the statutory presumption in sections 66 and 72 when it applies.

Any decision by the Council that Policy SP4 overrode the statutory presumptions had to be made in the knowledge that there were two presumptions at work here, not just one in SP4. In the High Court’s view the Council’s planning committee did not do that.

The court’s decision on this ground alone was sufficient to see the planning permission quashed.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.


Early Housing Need Review Mechanism acceptable to make Planning Core Strategy Sound

If a local planning authority commits itself to an early review in which it will assess the full housing needs of it’s area and consider whether those needs can be met, can that authority lawfully adopt its core strategy, without a present assessment of those needs, on the basis that it has that commitment in it?

That was the question in the High Court case of Grand Union Investments Ltd v Dacorum Borough Council [2014].

Grand Union’s planning consultants, Savills, responded on its behalf to consultation on the draft core strategy. Ultimately they contended that, in the light of household projections, the core strategy should provide for the development of 563 dwellings a year, and a total of 14,080 for the plan period, and that the Council’s intended provision of 11,320 dwellings in the plan period would not meet the borough’s housing needs.

When the draft core strategy went for approval by the Government planning inspector he said there was insufficient substantive evidence to enable him to be confident that 11,320 dwellings represented a full objectively assessed need.

One of the options the inspector then suggested for the Council was “to commit to an early partial review of the [core strategy] (by way of an appropriate [main modification]), in order to investigate ways of assessing and meeting housing need more fully (taking into account up-dated household and population projections)”.

The Council accepted this suggestion and modified the core strategy accordingly.

Grand Union challenged the lawfulness of the core strategy as modified in this way.

The High Court ruled that the Council lawfully adopted the core strategy.

Testing the soundness of a plan was not the court’s task. That task was a matter of planning judgment. The court’s jurisdiction was limited to review on traditional public law grounds whether the Council’s adoption of the plan on the inspector’s recommendation was irrational.

Irrationality would require an unusually bad error of judgment. It must shown that the decision falls outside the range of judgment open to a reasonable decision-maker.

The inspector judged that the modification was a sufficient solution – proportionate to the problem. This was not an irrational view. It was entirely reasonable.

It was “pragmatic, rational and justified” and the reasons the inspector gave for those conclusions were not only adequate and clear, but make perfectly good sense. Another inspector might have come to a different view. But that did not mean that this inspector’s conclusion, formed on the evidence and representations he had heard, was bad as a matter of law.

The inspector neither neglected nor misunderstood any relevant part of Government planning policy. He clearly had regard to the principles in national policy relevant to the matters he had to consider.

So although the core strategy was reliant on an early review mechanism for determining housing need, Grand Union’s challenge to it’s lawfulness and sufficiency was rejected.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke planning advice in individual cases.

Use of Non UK Contractor hugely boosted Customer’s output VAT liability

Section 8 of the Value Added Tax Act 1994 (“VATA”) provides a “reverse charge” procedure whereby, if a person (“A”), who does not belong in the UK, supplies services to a business (“B”) which does belong in the UK, B is treated as if B had made the supply to itself (and A is treated as not having made the supply).

In Muster Inns Ltd v Revenue & Customs [2014], Mr Lackovic and Mr Davies decided to found a Guernsey company. Mr Davies was, then, in a relationship with Miss Le Poidevin, a Guernsey resident. In order to incorporate a Guernsey company, a Guernsey resident shareholder was thought to be required so Mr Lackovic and Miss Le Poidevin incorporated and became equal shareholders in Amberley Construction Ltd (“Amberley”). In June 2011 Mr Davies had become a director: the intention being that Mr Davies would take Miss Le Poidevin’s place as shareholder.

Amberley’s registered office was Miss Le Poidevin’s house in Guernsey. The company maintained a bank account at the HSBC in Guernsey.

Miss Le Poidevin did the administration, sent out invoices and collected money. She kept an eye on stage payments and costs. She administered payment of suppliers’ invoices and wages, the operation of the construction industry scheme and, PAYE.

Mr Davies found and managed building contracts for the company in Guernsey during 2012.

Amberley had clearly established its business establishment in Guernsey. That was the location of its registered office and where its administration was conducted. It was where Mr Davies sought and managed building contracts, and where Mr Lackovic and Mr Davies met to discuss projects.

Muster Inns, the owner of the Maltsters Arms, a pub, restaurant and B&B business in Devon had begun running the pub in the second half of 2011.

It engaged Amberley to do a large part of some refurbishment work.

Mr Lackovic got fed up with commuting to Guernsey and wanted to find jobs in the UK. While he was at the Maltsters, he quoted for a job locally and for several other jobs in Gloucestershire. Those attempts made to get further work had not been successful and the day-to-day management of the Maltsters project took up the vast majority of Mr Lackovic’s time and attention.

Amberley invoiced Muster Inns for the work. Muster Inns made payments to Amberley’s HSBC account in Guernsey by BACS. The invoices included VAT which Muster Inns reclaimed as input tax in its VAT returns.

However as the business made little supplies in the relevant periods, those large input tax reclaims meant they had VAT returns that showed net amounts of VAT being due back to Muster Inns.

HMRC paid the VAT shown as due to Muster Inns.

On 10 January 2012 HMRC issued a VAT registration certificate to Amberley but later in the year they decided that Amberley should not have been VAT registered and cancelled its registration retrospectively to the date of issue of the VAT certificate.

HMRC had decided that Amberley did not “belong” in the UK so section 8 of VATA brought the “reverse charge” system into play with the result that the building work done by Amberley for Muster Inns had for VAT purposes to be treated as having been supplied by Muster Inns (to itself) rather than by Amberley. So that no VAT was chargeable by Amberley with the consequence that Muster Inns could claim no credit for it and Muster Inns should instead have declared additional output tax in its returns in respect of the supply it was deemed to have made to itself.

In January 2013 HMRC wrote to Muster Inns with VAT assessments of £33,600 and £21,151 for the two quarters for which Muster Inns had recovered input tax on Amberley’s invoices.

Muster Inns’ appeals against these assessments included the argument that Amberley did belong in the UK so that the “reverse charge” procedure did not apply.

At the Tax Chamber of the First-Tier Tribunal Muster Inns had argued that Amberley had a fixed establishment in the UK as Mr Lackovic managed Amberley’s business there and had a presence in the UK equipped with the human and technical resources to conduct its commercial activities in the UK through him and at the Maltsters Arms.

The Tribunal accepted that Amberley had a presence in the UK in the form of Mr Lackovic who acted as its agent in respect of the work at the Maltsters Arms and through his presence in Gloucestershire. However Mr Lackovic’s failure to obtain work at Gloucester meant Amberley made no supplies in connection with his being in Gloucester and it remained the case that Amberley’s only economic activity was at the Maltsters Arms.

As regards Amberley’s base at the Maltsters, Amberley had gathered there the substantial and sizeable human resources necessary for the provision of services to Muster Inns i.e. the management of the contract and the supply and the labour including the technical resources: the computer, internet and telephone for the provision of materials which were sourced locally to the Maltsters.

The fact that the invoicing and payment of suppliers and workers were arranged in Guernsey did not of itself mean that the necessary resources to service the Muster Inns contract were not present in the UK. Those back office functions were necessary to the service carrying on only in that suppliers or workers needed paying or they would not work or provide materials. However, but they were not immediately necessary to the supply of the building service at the time the work was done.

So the Tribunal concluded that the establishment Amberley had at the Maltsters had the necessary structure of human and technical resources to service the Maltsters.

However that establishment was insufficiently permanent or stable. During the period from January to June 2011 Amberley had a contract which was likely to last until July 2011. It was possible it might have been extended to include the second phase of the works, but even if that had happened its economic activity at the Maltsters was limited in time and unlikely to have gone on beyond 2013.

Mr Lackovic had only sporadically and unsuccessfully sought further work in the UK so this did not result in any contract or economic activity in the period. Had contracts been made for further work a degree of permanence would have been indicated.

So Amberley did not belong in the UK and section 8 did apply to the supply of the building work. Accordingly (1) Amberley was to be treated as not having made the supply of building works, and (2) Muster Inns was to be treated as having made the supply to itself with the result that it was liable to account to HMRC for output tax on the supply and entitled to input tax credit for that tax.

In one of the two VAT periods referred to above, the effect of Muster’s failure to include the “reverse charge” output tax in the return for the period and its mistakenly logging the Amberley input “tax credit” (instead of a “self supply credit” in respect of that “reverse charge”) was to convert what should have been Muster owing HMRC tax of £10,179 into a claim that HMRC should repay them £10,972.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Planning inspector could exercise own judgement as to whether extra delivery noise acceptable

A challenge to a planning permission under Section 288 of the Town and Country Planning Act 1990 may be brought only on normal public law grounds. It is not an opportunity for a reconsideration of the planning merits of the decision made by the planning authority/Secretary of State’s inspector. It’s much concerned with whether a decision was based on a correct understanding of any relevant development plans and of any evidence. But within that context the planning authority/inspector is entitled to reach their own planning judgment.

The court is the final authority as to the interpretation of any relevant policy document but will not interfere with the planning authority/inspector’s planning judgment which is the exclusive province of the planning authority/inspector.

The High Court case of Lord Mayor And Citizens of the City of Westminster v The Secretary of State for Communities And Local Government & Anor [2014] concerned a proposed Sainsbury’s in Greencoat Place, Westminster which the Council had described as “a quiet road” in “a quiet hinterland” with “low ambient noise levels”. However, the figures produced even by the Council entirely failed to back that up.

The court found that the proposed grocery deliveries that the inspector had to consider were just a further series of noisy events in what was already a quite noisy street: especially during the day time, when the street had a considerable number of very loud noise events already.

The inspector’s task had been to evaluate the impact of adding the noise of deliveries to the existing noise in Greencoat Place. In order to do that he had, firstly, to determine how the baseline of existing noise was to be established; then he had to see how he could most appropriately add the extra delivery noise to that base to discover the impact of the proposed development.

In respect of both existing noise and the delivery noise the inspector had a number of measurements available including LAeq.1Hr and LAmax.1Hr, showing the ambient noise averaged over one hour and the maximum noise to be heard in an hour. The data he had included indications as to how many loud noise events there were in the existing situation, and how many loud noise events would be created by delivery.

Sainsbury’s had proposed that the LAeq figures be aggregated across a 12-hour day. That would have given an average ambient noise figure for an entire day but, the inspector noticed it failed to recognise that some hours were quieter than others.

On the other hand the Council wanted to average all the quietest hours, which would have given an indication of the ambient noise in the quietest hour of the day, but failed to recognise that for the rest of the day the ambient noise was louder, so that the impact of a delivery would be less.

Exercising his planning judgement, the inspector had been entitled to conclude that any increase in noise levels is undesirable, but he had to judge whether the proposed increase was unacceptable in what was not the quiet backwater described by the Council, but, already, a noisy city street.

Accordingly the Council’s challenge to the planning permission failed on this ground and, in fact, on a number of other grounds as well.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.