10 C O N T E X T 9 3 : M A R C H 2 0 0 6 in Note (2) below) or is intended for use solely for a relevant residential purpose or a relevant charitable purpose after the reconstruction or alteration and which, in either case, is: a) A listed building, within the meaning of [the Listed Buildings Act] or [the Scottish Listed Buildings Act] or [the Northern Ireland Order]; or b) A scheduled monument within the meaning of [the Ancient Monuments Act] or the Historic Monuments and Archaeological Objects (Northern Ireland) Order 1995.’ This formulation was considered at length by the House of Lords in Zielinski Baker. Lord Walker held that it could be divided into three elements. A protected building is thus: 1) A building, 2) which is designed to remain as or become a dwelling [or be used for a residential or charitable purpose], and 3) which is a listed building [or scheduled monument] within the meaning of the relevant legislation. Dwellings The type of building most commonly encountered in cases relating to zero-rating is ‘a building designed to remain as or become a dwelling or a number of dwellings’. It thus includes both a conventional house and a flat. However, works to a building that constitutes ancillary accommodation to a dwelling will not be not zero-rated, since such a building can not itself be a dwelling, and thus can not be a protected building – even where it is in the curtilage of a listed building. This provision was the subject of the decision in Zielinski Baker. Works were carried out to an outbuilding at the Mere, Little Houghton, in Northamptonshire, a listed building of around 1830. The outbuilding, built at around the same time as the main house and connected to it by an ornamental wall, was initially a stable and carriage shed, and latterly a garage and laundry. The outbuilding was not listed in its own right, but was undoubtedly in the curtilage of the listed house, and thus part of a listed building within the meaning of section 1(5) of the Listed Buildings Act. Listed building consent had been given for the conversion of the outbuilding into changing and games facilities. The question was whether the cost of those works could be zero-rated for VAT. The VAT and Duties Tribunal initially held that it was; that was overturned in the Chancery Division; its decision was in turn reversed (but only by a majority) by the Court of Appeal. That was then overturned in the House of Lords, who held – albeit, again, only by a majority – that the works were not zero-rated. That, if nothing else, indicates that the law is not altogether straightforward.The outbuilding in the instant case was accepted by all to be a separate building, and it was – to use Lord Hoffman’s accurate formulation – ‘a listed building, or more accurately part of a notional listed building’. But it was not itself to remain or become a dwelling; and it therefore failed to comply with the second of Lord Walker’s three tests. The outbuilding was thus not a protected building within the meaning of the VAT Act; and works for its alteration would therefore not qualify for zero-rating. It is therefore not enough that a building should be within the curtilage of a building listed in its own right, so that listed building consent is required for its alteration. The one exception to this principle is that the Act specifically provides that a dwelling does include a garage occupied with the dwelling, provided that it was built at the same time as the dwelling – or, where the dwelling was substantially reconstructed, at the same time as that reconstruction. This has recently been interpreted by a tribunal (in Grange Builders (Quainton) Ltd (2005)) as meaning that, to justify zerorating, the building to which the approved alterations are carried out must at the time of the alterations be used for the storage of vehicles, regardless of the purpose for which it was built. As a result of that decision, HMRC now accepts that the key test is that the building in question should have been in use as a garage before the works and continue to be used as one afterwards. Other categories of protected buildings A building may also be a protected building if it is intended for use for a ‘relevant residential purpose’. That includes use as communal living accommodation, such as a children’s home, nursing home, students’ hostel, barracks, home for the elderly, hospice or monastery – but not a hospital, a prison or a hotel. The key consideration is whether the residential element is primary (as in a home providing residential accommodation, with care for those who need it), in which case zero-rating is allowable, or secondary (as in a hospital, principally providing medical care). This was considered by a VAT tribunal in relation to a group of three former agricultural buildings in Herefordshire, converted to form respectively a nursing home (in the former farmhouse, listed in its own right), sheltered housing (in a barn attached to the farmhouse by a link block), and associated administration (in another building attached to the barn by screen walls) (Hill Ash Developments (2000)). The tribunal accepted that the three buildings had originally formed one complex; and that it was perfectly reasonable for the administration function to be in a separate building. Accordingly it allowed zero-rating on all of the conversion works. This decision is not altogether easy to reconcile with the barn cases noted above, but it would seem to indicate that a more relaxed approach might be allowed where a group of buildings are all used for a ‘relevant residential purpose’ than would be appropriate in the case of a building ancillary to a ‘dwelling’. The other broad category of listed buildings and monuments (alongside residential buildings) that attract zero-rating is ‘buildings in use for a relevant
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