[2012] UKFTT 429 (TC)
TC02111
Appeal number:
EDN/08/23/, TC/09/0118 & TC/09/10694
VAT;
use of castle for function such as wedding; additional supplies of overnight
accommodation, afternoon tea and breakfast; single or multiple supplies; whether
supplies including use of castle exempt under VATA 1994, Schedule 9 Group 1;
whether exemption excluded by item 1(d)
FIRST-TIER TRIBUNAL
TAX CHAMBER
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DRUMTOCHTY
CASTLE LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE J GORDON REID QC, FCIArb.
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IAN M P CONDIE, CA
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Sitting in public at George
House, Edinburgh on 17 & 18 April 2012
Philip J D Simpson, advocate
on the instructions of Robertson Craig & Co, CA, for the Appellant
Ian Artis, advocate instructed
by the Office of the Advocate General on behalf of HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2012
DECISION
Introduction
1.
These three appeals, which have been consolidated by Direction dated
19 June 2009, relate to the use of a castle for the purposes of a
function such as a wedding service and reception; and whether the supply or
supplies are a single supply, or multiple supplies and whether the supply or
supplies should be standard rated or exempt.
2. A
Hearing took place at Edinburgh on 17 and 18 April 2012. Philip Simpson,
advocate, appeared on the instructions of Robertson Craig & Co., Chartered
Accountants, on behalf of the Appellant. He led the evidence of Ewan
Kirkpatrick, general manager of the Appellant. Ian Artis, advocate, appeared
on behalf of the Respondents (“HMRC”). He led the evidence of Eilean Gray and
Fiona Marshall, experienced HMRC officers. A joint bundle of documents,
skeleton arguments and a bundle of authorities were also produced. All
witnesses produced written statements. The HMRC officers were not
cross-examined.
The Assessments under appeal
3. The
first Notice of Assessment, dated 21 May 2007, is in the sum of £130,908 plus
interest and covers the periods from 1/9/04 to 30/11/04, and 1/3/05 to
31/1/07. The second Notice of Assessment is dated 11 March 2009, is in the sum
of £155,771.00 plus interest and covers the period between 1/2/07 to 31/10/08.
The total, including notified interest, was £296,722.40 as at 11 March 2009.
There is no dispute on quantum.
4.
The third notice (and third appeal) is a misdeclaration penalty in the
sum of £23,361.00 and relates to the period specified in the second Notice of
Assessment
Grounds of Appeal
5.
These are remarkably brief given the sums involved. For the first
Assessment (the first appeal), the grounds are that Standard Rated VAT does
not apply to the supplies included in the Assessment. For the second
Assessment (the second appeal), the grounds are Assessment issued by HM
Revenue and Customs is not in accordance with relevant VAT legislation
6.
As for the third appeal, the grounds are Misdeclaration penalty
relates to assessment issued by HM Revenue & Customs which is not in
accordance with relevant VAT legislation.
Procedural History
7.
These appeals are of some vintage. They were sisted pending a complaint
to the Adjudicator. The HMRC witness statements are dated July 2009. The
complaint was rejected and the sist recalled. A Hearing fixed for 6 and 7
February 2012 was postponed at the Appellant’s request.
Principal Issues
8.
In broad terms, the Appellants provide Drumtochty Castle for use (as it
is put in their skeleton argument) as a functions venue, principally for
weddings. The question is whether what is supplied constitutes the grant of a
licence to occupy the Castle, or composite supplies the principal element of
which is the grant of a licence to occupy the Castle, or, as HMRC put it in
their skeleton argument, a composite supply of wedding facilities and services
which falls to be taxed at the standard rate.
Legal Framework
9.
S31 VATA provides that a supply of goods or services is an exempt supply
if it is of a description specified in Schedule 9. Schedule 9 Part II, Group 1
states inter alia:-
1
The grant of …any licence to
occupy land…….. other than
…………………..
(d) the
provision in an hotel, inn, boarding house or similar establishment of sleeping
accommodation or of accommodation in rooms which are provided in conjunction
with sleeping accommodation or for the purpose of a supply of catering;
NOTES
…………….
(9) “Similar
establishment” includes premises in which there is provided furnished sleeping
accommodation, whether with or without the provision of board or facilities for
the preparation of food, which are used by or held out as being suitable for
use by visitors or travellers.
10.
The grant of such a supply of land is therefore an exempt supply.
Paragraph (d) is an exception to the exemption. Accordingly, if the supply is
not a grant of a licence to occupy land or if the supply constitutes the
provision of a supply which falls within paragraph (d), the supply is not
exempt, and is standard rated, unless exempt or zero rated by virtue of some
other statutory provision. No such other provision is founded on in this
appeal.
11.
The statutory exemption and the exceptions to it fall to be construed in
the light of and having regard to the purposes of the underlying European
Directive being implemented, here the Sixth Council Directive 77/388/EEC, and
in particular, Article 13B(b).
12.
The question whether, for the purposes of VAT, a transaction involves
the provision of a single supply or multiple supplies has been considered at
great length and depth in recent years by courts of the highest authority.
More recently, however, the principles have been conveniently set forth in the
judgment of Roth J in HMRC v Bryce 2010 UKUT 26 (TCC) at paragraphs
19-27 to which we were referred. Neither party took issue with the statements
of law therein set forth. We have also taken into account the CJEU decision in
Purple Parking Ltd v HMRC 19/1/12 Case C-117/11 and the general review
of the principles applicable to single and multiple supplies set forth in David
Baxendale Ltd v HMRC 2009 EWCA Civ 831.
13.
In summary (for present purposes), (i) every supply of a service is
normally regarded as distinct and independent, (ii) a transaction which forms a
single supply from an economic point of view should not be artificially split
into separate supplies, (iii) where there are several elements to a transaction
one or more elements may be regarded as predominant and as constituting the
principal supply and the remainder regarded as ancillary to that principal
supply; it will be regarded as ancillary to a principal supply if it does not
constitute for the average consumer an end in itself but a means of better
enjoying the principal service supplied; the VAT treatment of the ancillary
supplies follows the VAT treatment of the principal supply; (iv) where none of
the elements can be regarded as principal or ancillary, they may be regarded
either as separate supplies or as elements of a single indivisible package or
transaction, (v) how those elements are regarded is determined by whether they
are so closely linked that they form, objectively, from the perspective of the
consumer, a single indivisible economic supply which it would be artificial to
split, (vi) in considering the essential features of the transaction and all
the circumstances in which it takes place (such as the terms of the
arrangements, the invoicing procedures, and what it was the consumer actually
received) to determine these issues, (a) a single or all-inclusive price, or
separate prices charged for two or more elements are relevant factors, (b) the
availability of similar services from separate sources is not relevant as that
possibility is inherent in the concept of a single composite transaction, and
(c) whether each or several of the elements each has value and utility in their
own right is not relevant.
14.
These principles demonstrate that the facts of each case need to be
determined and assessed with particular care in order to identify the nature of
the supply or supplies and to determine how the arrangements in any given case
fall to be classified for the purposes of VAT.
15.
With this framework in mind, we have reviewed the evidence and make the
following findings of fact which, unless otherwise stated, all relate to the
periods covered by the Assessments.
Facts
The Castle
16.
The owner of Drumtochty Castle, a Mr Anderson, granted, without charge,
a licence to the Appellant to operate their business from the Castle. The
licence was not produced and no details were put in evidence. The owner,
previously operated much the same business from the Castle as the Appellants
have done and do but did not claim that his turnover was exempt from VAT. The
financial relationship between Mr Anderson and the Appellant was not
discussed in evidence. According to Mr Kirkpatrick, whose evidence we
accept on this point, the Castle is being operated by the Appellant in
substantially the same way as Mr Anderson operated it.
17.
On the ground floor of the Castle there is a ballroom, three principal
rooms (two lounges and a dining room) and a television room. On the first
floor are eleven bedrooms.
18.
The Castle grounds extend to several hundred acres and include trout
lochs, forest trails, and clay pigeon shooting.
19.
The Castle is an approved place for civil marriages/civil partnerships
under the Marriage (Approval of Places) (Scotland) Regulations 2002. The
marriage may also be celebrated at the nearby church of St Palladius just
beyond the estate boundary.
20.
The Castle is licensed to sell alcohol.
21.
Between 2007 and 2011, between 58 and 68 weddings have taken place there
each year, with the occasional conference and corporate dinner over and above.
The average number of guests on each occasion is about 90, the largest being
about 120 and the smallest 12.
Staff
22.
There are ten full time staff namely, Mr Kirkpatrick (the general
manager), his personal assistant, an assistant manager, an estate worker who
lives on the estate, and six house-keeping staff. In addition there are seven
part-time employees who carry out a variety of housekeeping/breakfast
services; and bar services when requested by the customer.
23.
Staff waiting at table at the wedding breakfast are engaged by the
outside caterer. The full time staff serve breakfast in the mornings.
24.
Mr Kirkpatrick, who is a hotelier by profession, or his assistant
manager is present on site throughout the duration of the function. Mr Kirkpatrick
frequently acts as toastmaster. He considered that if the celebrations at a
wedding got out of hand, he had power to require a guest to leave. We
also infer from his evidence that he would take charge of any emergency that
might arise.
25.
On request and at extra charge, the Appellant’s staff will serve
drinks. Sometimes, on request, the Appellant provides a cash-bar which it mans
from its own staff.
26.
The housekeeping staff do not clean or launder the bedrooms on the first
floor at all over the duration of the function.
Advertising and Promotional Material and Terms of
Business
27.
The Appellant produced a brochure advertising wedding functions. It
contains a number of colour photographs of the Castle, the grounds and the
principal rooms. It states that the Appellant will meticulously plan and
organise every part, from the flowers and food to carriages and helicopters. It
also states We can organise a band or Scottish Ceilidh
28.
The brochure contains a list of additional services and prices including
Horse & Carriage, Church (payable direct to the Minister) additional
accommodation. Towards the end there is a page which states Additional
services which we will be pleased to co-ordinate. There is then a list of
the following items:-
“Use of St Palladius Church for the marriage
ceremony
Horse and carriage
Additional accommodation in a wing of the Castle
Services we can help you contact:
Photographer/video
Wedding cake
Florist for bridal and table flowers
Vintage cars
Music and entertainment
Piper or full pipe band
Hairdresser and beauty therapist
Accommodation and transport for guests
For your weekend guests some activities can be
organised within the castle grounds and tailored to your particular
needs:
Trout fishing (rainbow and brown trout)
Clay pigeon shooting
Cycling
Archery”
29.
The Appellant has standard terms of business in the following terms:-
Written
confirmation of booking is required with a deposit of £X which is
non-refundable.
50%
of the facility fee is due 6 months prior to the wedding date.
Prepayment
of 100% of the total of the facility fee, plus any additional services will be
required 4 weeks prior to the date.
Any
additional catering/drinks costs must be paid before departure from the Castle.
In
the event of cancellation by the hiring party, the cancellation charge will
equal the payments already made.
All
prices can be changed without notice prior to payment of the deposit.
Drumtochty Castle is a
non-smoking venue, if traces of tobacco are found in any of the rooms there is
a deep cleaning charge of £x applied.
We
regret that we cannot take any pets including dogs in the castle.
Biodegradable
confetti or Rose Petals can be used outdoors, however due to cleaning
difficulties confetti cannot be used inside the Castle.
Guests
may arrive at the Castle any time after 3pm and should vacate by 12 noon on the
day of departure.
The
burning of candles is limited to the dining room and ballroom due to safety
reasons.
The
use of smoke effects, aerosol sprays, sparklers and other “special effects”
should be restricted to outdoors.
Deliberate
damage to, or misappropriation of Castle property will be charged.
Provision is made on the form for the customer signing
and returning it to the Appellant.
30.
There is no separate brochure for corporate events.
31.
The Appellant is in direct competition with the hotel sector in relation
to the provision of wedding function packages. Ardoe House Hotel, Deeside, is
an example of such a competitor.
The typical services provided
32.
The Appellant charges a facility fee. This is usually in the order of
£11,000 for the first night and £2,000 for each additional night. This gives
the customers and their guests the use of the castle and its extensive grounds
for the duration of the function. During that period no other function takes
place at the Castle. In that sense, the customer has exclusive use of the
Castle and grounds. The period covered by the fee is usually from 3pm on
Friday to twelve noon on Sunday. During the summer, there are a number of
mid-week weddings at the Castle.
33.
The facility fee also covers afternoon tea on arrival and bed and
breakfast accommodation for up to twenty two people.
34.
Additional (optional) services, mostly at additional cost are frequently
provided. These include extra sleeping accommodation, chair cover hire, horse
and carriage hire, clay-pigeon shooting, and trout fishing. VAT is charged on
the supply of these services (except trout fishing which IS free). The
Appellant is sometimes asked to provide a cash-bar, which it does.
35.
The Appellant provides the cutlery, crockery, glassware and table linen
for the wedding breakfast provided by outside caterers.
36.
The Appellant recommends to the prospective client one or other of two
caterers with whom they work regularly. This had advantages for the
Appellant. They worked and liaised with caterers they knew and trusted. These
caterers were familiar with the layout of and the set-up at the Castle, and in
particular, the kitchen area. Moreover, the Appellant obtained payment of 5%
of the fee of the caterer selected.
Typical Arrangements with customers
37.
When potential clients visit the Castle, Mr Kirkpatrick discusses the
various aspects of the wedding, including catering, the church, and various
options. He provides a sample menu and makes recommendations about the various
third parties who might provide optional additional services eg having the
marriage celebrated in the chapel adjacent to the estate (the minister’s
contact number is provided); names of photographers, hairdressers, beauty
treatments, transport, outside caterers, florists etc.
38.
The customers then make their own arrangements with these third parties.
39.
On the evidence, we infer that if for example, the police were to arrive
during a function (there is we stress no evidence of this ever having happened)
to investigate an incident or a complaint and asked Who is in charge here;
who is the keyholder? Mr Kirkpatrick or one of his staff would have stepped
forward and said that he was in charge and held the keys. He and his staff
arrive before the guests so they have to open up, and they depart after the
guests have gone so they must lock-up too.
The actual VAT treatment of the services supplied
40.
The facility fee, in general, is treated as being exempt from VAT. It
is this treatment of the facility fee which is in dispute.
41.
The part of the facility fee relating to the provision of afternoon tea
and bed and breakfast accommodation is treated as including VAT at the standard
rate
42.
The Appellant charges VAT on the amount charged for extra sleeping
accommodation, horse and carriage hire and chair cover hire.
43.
The Appellant charges VAT on the amount charged for serving drinks.
Output tax is accounted for on income from the cash-bar.
44.
The Appellant receives 5% of the caterer’s charges. This is treated as
VAT inclusive and the VAT accounted for as output tax even although the
caterers do not appear to provide the Appellant with an invoice.
Invoicing and Payment
45.
The Appellant’s records show that they collate the various services
which they provide and charge for under a single booking reference. Thus, an
invoice specifying additional services such as horse and carriage, additional
accommodation, the provision of bar staff, drinks service (at £5 per head) and
chair covers will all appear on the same invoice (to which VAT is added) and
will be cross referenced to an invoice for the facility fee for your
wedding, to which no VAT is added.
46.
Where drinks are supplied by the customer and served by the caterers’
staff, the Appellant charges corkage of £5 per person.
HMRC Position
47.
Following a visit to the Castle and an examination of the Appellant’s
records, HMRC took the view, in their letter dated 10 April 2007 to the
Appellant’s representative, that the treatment of the fee for the hire of the
Castle as exempt was incorrect and that it should be standard rated, being
excluded from exemption by Schedule 9 Group 1 Item 1(d) to VATA. In subsequent
correspondence (letter 9 July 2007) HMRC expressed the view that a wedding
package appeared to be offered to clients.
48.
In response, the Appellant’s accountants pointed out (by letter dated
12 October 2007 inter alia that outside caterers, not the
Appellant, provided the wedding catering; those caterers provided their own
staff and dealt directly with the clients. Money was received from the
caterers but there were no invoices for this. Output tax on this money was
accounted for in the Appellant’s VAT returns.
49.
Following the first assessment, a reconsideration was requested. By
letter to the Appellant’s accountants dated 14 January 2008 (erroneously dated
2007), the HMRC reviewing officer agreed with the assessment and its basis.
50.
We should also add that there was some correspondence in 2005 and 2008
about whether HMRC had at one stage approved the VAT treatment of the facility
fee. This led to a complaint being made to the Adjudicator, which was
ultimately rejected in March 2011. However, nothing was made of this in
closing submissions, and accordingly we need say no more about it.
Submissions
51.
Phillip Simpson for the Appellant submitted that, for the purposes of
VAT, the supplies in dispute constituted a licence of the exclusive use of Drumtochty Castle and grounds. Alternatively, those supplies were composite supplies, the
principal element of which was that licence. The supply or supplies were thus
exempt in terms of Item 1 Group 1 in Schedule 9 to VATA. Moreover, those
supplies did not constitute the provision in an establishment similar to an
hotel, inn or boarding house of sleeping accommodation or accommodation in
rooms which were provided in conjunction with sleeping accommodation or for the
purposes of a supply of catering. The supplies were thus not excluded from
exemption by virtue of Item 1(d) of Group 1.
52.
Mr Simpson developed those submissions by reference to Bryce, Card
Protection Plan Ltd v CC&E 1999 ECR 1-973, Levob Verzekeringen v
Staatsscretaris van Financien 2005 ECR 1-9433, Blasi v Finanzamt Munchen
1998 ECR 1-481, particularly the Opinion of the Advocate-General,
and Asington Ltd v CC&E 2003 UKVAT V 18171, Waldendoff 2008 STC 3079, Priory M Blendhome Ltd v CC&E 1999 LON/98/966 No 16048,
Willerby Manor Hotels Ltd MAN/99/871 NO 16673, Chewton Glen Hotels Ltd (LON20/5/08
Acrylux, 2009 UKFTT 223 (TC).
53.
Ian Artis, advocate, for HMRC submitted that the issue was whether the
supply was a supply of composite wedding services or whether there was a supply
of an interest in land for consideration namely the facility fee. The
predominant activity was the supply of services in relation to the use of the
Castle as a wedding venue; these services all slotted together; the whole
purpose was the celebration of the wedding and the provision of rooms had no
independent purpose. He submitted that the facility fee was high and only made
economic sense in the context of a wedding as opposed to the simple renting of
the Castle. What is being supplied is a prestige event. The very notion of a
facility fee suggests that a whole range of services are being brought
together. The giving of advice on how to bring the event together was a
service based on experience and provided as part of the facility. The standard
terms and conditions do not give the client free rein; they apply to all the
services provided by the Appellant. Typically, clients were supplied with a
package of services paid for under a single contract rather than a bare let.
The Appellant competed in the hotel market and this was relevant to the
analysis of the supply.
54.
Mr Artis further submitted that leasing and letting of immovable
property was a passive activity rather than an economic activity producing
added value (Belgian State v Temco Europe SA (Case
C-284/03 2005 STC 1451. The client was not acquiring or enjoying an interest
in land; there was restricted access; the Appellant’s staff were on the
premises and this was quite different from a landlord inspecting premises from
time to time.
55.
He reminded us that exemptions to the generality of the taxation of
services are to be interpreted strictly Stichtung Uitvoering Financiele
Acties v Staatssecretaris Van Financien (Secy of State for Finance) (1991 2 CMLR 429, Blasi v Finanzmt Munchen 1998 STC 336.
56.
He also referred to Card Protection Plan 1999 STC 270, Levob,
David Baxendale Ltd 2009 EWCA civ 831 and Purple Parking Ltd and
Airparks Services Ltd v HMRC (Case 117/11); Best Images Ltd 2010 UKFTT 175 (TC), Acrylux and the Sixth Directive 77/388/EC Article
13.
Discussion
57.
We consider first whether there has been the grant of a licence to
occupy land within the meaning of Item 1 of Group 1 to Schedule 9. If there
has been no such grant then the question of whether there has been a composite
supply the principal element of which is the grant of a licence to occupy land
and the VAT treatment of which any related ancillary services follow, does not
arise. In those circumstances, the composite supply of services, whether there
is a principal supply and ancillary supplies or whether none of the supplies
predominates, will be standard rated, unless they are exempt for some other
reason. No other reason is relied on in this appeal.
58.
According to the European jurisprudence, the exemptions in Article 13 of
the Sixth Directive, have their own independent meaning in Community Law. The
basic concept is the conferring of the right to occupy property as owner and to
exclude any other person from enjoying that right; these are both essential
ingredients. It is usually a passive activity linked to the passage of time
and which does not generate added value from other activities which are
commercial in nature. [The theory underlying the exemption and the exceptions
to it is set out in Advocate General Jacobs’ Opinion in Blasi (paragraphs
15-18), and is discussed in Asington. It is of some interest to note
that one of the purposes of the exceptions to or exclusions from the exemption
is to ensure that the provision of temporary accommodation similar to and hence
in potential competition with that provided in the hotel sector is subject to
tax (see paragraph 18, endorsed by the Court at paragraph 20)]. Duration is not
conclusive, but a short period may be an appropriate basis for distinguishing
an arrangement which is exempt and one which is excluded from the exemption.
The arrangement may fall within the exemption even though the owner has a right
of regular inspection, or certain parts are used in common with others. (see Temco
paragraphs 16-25; Walderdorff paragraphs 17-20).
59.
We acknowledge that the exemption falls to be interpreted strictly but
exclusions from the exemption do not (see eg Blasi at paragraphs 18 and
19). Nevertheless, the exemption should not be construed in such a way as to
deprive the exemption of its intended effect (Temco at paragraph 17).
60.
In our view, the arrangements made between the Appellant and its clients
do not constitute or include the grant of a licence to occupy land, here, the
Castle and its grounds. The arrangements do not confer on the client exclusive
rights of possession, occupation or control or the right to exclude others.
Rather, these arrangements constitute the active commercial exploitation of the
Castle as part of an overall package of supplies. The nature of the
arrangements does not have the flavour of the grant of a licence of land, but
is best understood as the provision of a range of commercial services part of
which is making the Castle and its grounds available for use. These services
include the benefits of management, superintendence and maintenance of the
Castle. The provision of the Castle and the selected additional services
supplied by the Appellant and third parties all go hand in hand. This is not
the relatively passive activity of letting of land as contemplated by Article
13 of the Sixth Directive.
61.
The arrangements and facilities provided added value to the provision of
the Castle. They were not merely ancillary to the use or for the better
enjoyment of the Castle. They were a substantial part of the overall package
of facilities and services. These facilities and services which were provided
by the Appellant, including making recommendations about the services of third
parties, constitute along with the use of the Castle, a package of closely
linked wedding function services.
62.
That range of services is similar to what is provided in certain
branches of the hotel sector, eg a wedding celebrated at a Country House hotel
where the ceremony takes place there or nearby, the wedding breakfast takes
place there along with other festivities, such as music and dancing, with some
guests staying overnight at the hotel, and with some services provided by third
parties whether directly to the customer or as sub-contractor to the hotel. It
is plain as was accepted in evidence by Mr Kirkpatrick, that the Appellant
is in direct competition with such hotels.
63.
The principle of fiscal neutrality inherent in the common system of VAT
precludes or at least discourages treating similar goods and supplies of
services, which are thus in competition with each other, differently for VAT
purposes. From the point of view of the average consumer, it is difficult to
see any difference in substance from the wedding package offered by the
Appellant on the one hand, and a wedding package which might be offered by say
a country house hotel. By according the multiple or complex supply of services
by the Appellant, embraced in the phrase wedding package, the same VAT
treatment as similar services by other competitors, the principle of fiscal
neutrality is respected (Purple Parking Ltd at paragraph 38).
64.
While the facts of each case must be carefully considered, we note that
there is a consistent line of Tribunal decisions in recent years where, on
similar facts and similar arguments, it has been held that the use of premises
for the supply of services for the purposes of celebrating a wedding or other
event does not constitute an exempt supply.
65.
Thus, in Blendhome the issue was whether a hotel’s charge for an
exclusivity fee was exempt; the fee was for exclusive use of the public rooms
including the bar and restaurant and the entire 35 acres of grounds for the
period of the ceremony and the reception; certain other facilities and
services were agreed to be either exempt or standard rated. In dismissing the
taxpayer’s appeal, the tribunal found that the exclusivity was part of the
wedding celebration and reception arrangements which were the primary
consideration for moneys paid; the right to enjoy the use of the hotel and
grounds free from the presence of non-wedding guests was not a right to occupy
the non-catering parts of the hotel and grounds; the exclusivity was an
enhancement of the reception or a means of better enjoying the principal
services supplied.
66.
Willerby concerned the hire of a room for an evening reception
made in conjunction with the wedding breakfast. The tribunal, in dismissing
the appeal, held that what was offered was a package of wedding reception
facilities consisting of whatever goods and services the customer ordered; it
was irrelevant that the charge for a room for an evening function was
calculated and charged differently from the charge for the room for a wedding
breakfast. All the goods and services were provided by the appellant. The
hire of the function room for an evening reception was a supply ancillary to
those of wedding reception facilities and was integral to the reception
arrangements; it was a means of better enjoying the principal service
supplied; all this it was said accorded with commercial reality; it was a
continuation of one function, an entire wedding reception. The appellant thus
made a composite supply of a standard-rated package of wedding reception
facilities.
67.
In Leez Priory, the appellants offered a large country house with
40 acres of adjacent gardens and parkland as a wedding and reception venue.
The services provided in conjunction with the use of the priory and grounds
were selected by the customer and included catering (with bespoke menus),
overnight accommodation, discotheque, florist, photographer, bar facilities
including staff, and front of house manager. The evidence was that the
appellant sought to combine the provision of the right to use the priory for
weddings with the provision of all the other services related to the supply of
food, drink, accommodation and entertainment, together with other services to
persons using the priory on those occasions. Although the venue charge was a
separate charge the tribunal concluded that what was supplied was a complete
package of which the venue charge was only a part. There was a composite
supply of wedding functions or wedding services. The supply was
the package. The tribunal considered that it would be a distortion in economic
terms if the venue charge were to be treated as the principal service when the
other services amounted to the major part of the transaction. Thus, the main
supply, namely that of wedding functions, was not exempt.
68.
The tribunal in Leez Priory also considered the exception to the
exemption on the hypothesis that they were in error in concluding that the
venue charge was not a distinct supply of the grant of a licence to occupy
land. They noted that the priory did not hold itself out as being an
establishment open to visitors or travellers generally, but was in other
respects similar to an hotel, inn or boarding house; it provided sleeping
accommodation and accommodation in rooms which were provided for the purpose of
the supply of catering. On the foregoing hypothesis, the tribunal’s conclusion
was that the priory was a similar establishment. Wedding guests were
visitors to the priory.
69.
Chewton related to the hiring of rooms at a hotel for wedding
ceremonies. A comprehensive service was provided including a range of
catering, overnight accommodation, flowers, music and dancing and other related
services as well as the use of a room for the ceremony itself; there were also
extensive grounds suitable for wedding photography. Which services over and
above the room hire were supplied varied depending on the customer’s wishes.
Even where only room hire was supplied the customer received permission to park
at the hotel and to use the hotel’s common facilities and possibly the grounds
for photography. The tribunal observed that the transactions were far removed
from the letting of property by a landlord to a tenant and that the couples
occupying the wedding room did not do so in any sense as owners with the right to
exclude others.
70.
In the tribunal’s view in Chewton, the transactions were best
understood as the provision of a service and a transaction of a commercial
nature even in the case where a room was let without much, if anything,
additional by way of specific services being provided. The tribunal concluded
that there was a single supply from an economic point of view; the wedding
services of the hotel were supplied as a package, even although the various
elements chosen by the customers were broken down so far as cost was
concerned. Where additional services beyond the room hire were minimal these
additional elements were regarded as a better means of enjoying the principal
service of the room hire. However, even in those circumstances the supply was
not an exempt supply. The reason appears to be that the couples occupying the
room did not do so in any sense as owners with the right to exclude others (as
noted above). Where a more extensive range of services was included, then the
package as a whole went beyond the hire of the room with services purely
ancillary thereto. The appeal was dismissed.
71.
Acrylux concerned a large 22 bedroom country house in rural Devon. It was used for a variety of events including weddings, birthday parties, murder
mysteries and group get-togethers, although by far the largest use was for
weddings. Whoever hired the property had to organise their own caterers,
waitresses and other services, although there was an approved list which
customers were encouraged to use. The property was supplied fully furnished
and equipped with the basic amenities needed for two or three days use. The
appellant provided some form of booking and reception service, and cleaned the
property each week and changed the linen. The provision of sleeping
accommodation was an important part of the package. The tribunal observed that
the fact that the appellant supplied the whole property which could then be put
to a variety of uses, including sleeping, rather than supplying sleeping
accommodation as such, did not prevent the supply of being a taxable supply
especially when the sleeping accommodation was an essential part of the
package. The appellant was clearly providing services of a type ordinarily
provided by the hotel sector. The tribunal’s overall conclusion was that the
property was a similar establishment within Item 1(d) of Group 9 and that the
appellant’s supplies were therefore taxable.
72.
Best Images related to premises (two large rooms or halls in a
building) used for Indian weddings; no question of the provision of sleeping
accommodation arose. Catering appeared to be arranged direct between the
customer and the caterer recommended by the appellant. The appellant also
guided the customer to various other suppliers (flowers, music, Indian dancers
etc); the appellant’s director and/or his wife were present at the weddings.
The appellants also provided bar staff (but not waitress or serving staff),
chairs, someone to clean up when needed, and security staff. The customer
expected these various services as well as the use of the rooms in return for
the price paid. The tribunal concluded that it would be artificial to split
the additional services which the appellant supplied from the provision of the
premises; the premises and additional goods and services were obtained by the
same bargain. These were so closely linked that they constituted a single
supply. The additional services provided added value and were not simply for
the better enjoyment of the hall; they were not merely ancillary to the use of
the land. The conclusion was that the appellant was not providing the passive
activity of letting land but providing to its customers the benefits of its
management, supervision and maintenance of the premises. This went beyond
merely providing the key to the door. The supplies did not fall within Item 1
of Group 1.
73.
What emerges from these decisions is that they are analysed as a closely
linked range or package of services which includes the use of a hall, rooms,
building and/or adjacent grounds for a very short period, comparable with but
not necessarily identical to the facilities and services provided by many
hotels. The use of the rooms, hall, building and grounds in question is not
regarded as a grant of a licence to occupy land but as an element of the
overall package. It is artificial to split the additional services supplied
from the provision of the rooms, hall or building. These additional services
were not merely ancillary to the provision of the rooms etc but actively
provided added value.
74.
In the light of our findings and conclusions, all the elements of the
single complex supply of services which make up the wedding package receive the
same VAT treatment. Even if the use of the Castle is predominant, as there is
no grant of a licence, that element is standard rated. If the other elements
are ancillary, they, too, are standard rated, because, either they follow the
treatment of the predominant element (which we have held is not exempt)
or because they are elements which, if regarded separately, would be standard
rated in any event.
75.
In the light of our conclusions, it is unnecessary for us to consider
whether the Appellant’s supplies fall within the exception to or exclusion set
forth in Item 1(d) of Schedule 9 Part II Group 1 to VATA. Had it been
necessary to do so, we would have concluded that the supplies fell within Item
(d).
76.
Finally, we record that no separate argument was advanced in relation to
the misdeclaration penalty appeal. It stands, or rather falls with the other appeals.
Summary
77.
All three appeals are dismissed.
78. This document contains full
findings of fact and reasons for the decision. Any party dissatisfied with this
decision has a right to apply for permission to appeal against it pursuant to
Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules
2009. The application must be received by this Tribunal not later than 56
days after this decision is sent to that party. The parties are referred to
“Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)”
which accompanies and forms part of this decision notice.
J
GORDON REID
TRIBUNAL JUDGE
RELEASE DATE: 29 June 2012
