Blue Chip Hotels Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 May 2017 |
| Neutral Citation | [2017] UKUT 204 (TCC) |
| Date | 19 May 2017 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2017] UKUT 0204 TCC
Upper Tribunal (Tax and Chancery Chamber)
Judge Roger Berner, Judge Greg Sinfield
Timothy Brown, counsel, instructed by Dave Brown VAT Consultancy, appeared for the appellant
Sarabjit Singh, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Whether separate supply by hotel of room for civil wedding ceremony was (1) an exempt supply of land or (2) a standard-rated supply of services – Hotel actively exploited room and added significant value – Not the leasing or letting of immovable property – Directive 2006/112 (the Principal VAT Directive), art. 135(1)(l) – Value Added Tax Act 1994 (VATA 1994), Sch. 9, Grp. 1 – Company's appeal dismissed: the hire of licensed premises was a separate and standard-rated supply, not an exempt supply of land.
The Upper Tribunal (UT) dismissed the company's appeal against the decision of the First-tier Tribunal (FTT) ([2016] TC 05078) that the hire of a room, which was licensed for civil-wedding ceremonies, was a separate and standard-rated supply, not an exempt supply of land. The company added significant value to the supply of the room by obtaining approval for its use for weddings and performing all the required activities to maintain such approval.
Blue Chip Hotels Ltd (BCH) hired out a room (the Tamarisk Room), in which civil wedding ceremonies were carried out. The Tamarisk Room was arranged with (1) chairs for the guests and (2) a desk for the registrar. BCH did not opt to tax the property. Arrangements with, and payment for, the registrar were made by the bride and groom. The Marriages (Approved Premises) Regulations 1995 (SI 1995/510) requires the room for a civil ceremony to be physically separate from the rest of the wedding activities. The Tamarisk Room was physically separate from where the other parts of the wedding celebration took place. No catering services or alcohol were provided in the Tamarisk Room. After the ceremony, guests had to enter another room to get drinks. The only activity carried out in the Tamarisk Room was the wedding ceremony. No other services were provided to customers as part of the supply of the Tamarisk Room. There was significant added value in the provision of the Tamarisk Room as a room that was approved for carrying out marriage and civil partnership ceremonies, as compared with the hire of an unapproved bare room with some chairs and a desk.
BCH argued at the FTT that:
- the supply of the hire of the Tamarisk Room, which was licensed for civil-wedding ceremonies, was an exempt supply of land under VATA 1994, Sch. 9, Grp. 1, i.e. the supply of the Tamarisk Room was a separate supply, being a component of the wedding package, which was a mixed supply, or
- if it was not possible to treat the supply of the Tamarisk Room as a separate supply, the supply was a single composite supply, of which the principal element was an exempt supply. The other supplies, which made up the wedding package, were ancillary to the exempt supply.
HMRC argued that the supply was part of:
- a taxable supply of a wedding package, comprising catering services, the hire of other rooms at the hotel and the hire of the Tamarisk Room, i.e. there were multiple but no main elements, which was one standard-rated supply; or
- a composite supply of which the principal element was the supply of the wedding reception and therefore the whole supply was standard rated.
BCH offered customers, who wanted a wedding venue, the following options:
- hold the wedding ceremony only in the Tamarisk Room at the hotel and hold the wedding reception and all other parts of the celebration elsewhere;
- hold the wedding ceremony in the Tamarisk Room and the wedding reception (including full catering) at the hotel;
- hold the wedding ceremony at the hotel with some additional catering (drinks), but not a full reception or wedding breakfast; or
- hold only the wedding reception at the hotel and hold the wedding ceremony elsewhere, e.g. at a church.
The invoices for any of the first three options showed the charge for hiring the Tamarisk Room as a separate VAT-exempt item. Any other services were separately itemised and charged VAT at the standard rate. HMRC accepted that the supply under the first option, the use of the Tamarisk Room only for the wedding ceremony, was an exempt supply. Thus, the treatment of supplies under the first option was not disputed.
The FTT noted that the fact that a single charge was made, or that services were described as a single package, did not determine the treatment.
The parties agreed that the test for determining whether a supply was a single, or a separate, supply was whether elements of a supply were so closely linked that they formed objectively a single indivisible economic supply, which it would be artificial to split.
In dismissing BCH's appeal, the FTT held that the supply of the Tamarisk Room was not an exempt supply of land when provided as part of a wedding package, which included the wedding ceremony, whether or not the price paid for the hire of the room included the supply of catering and other related services. It was not the supply of two glasses of prosecco that determined the nature of the supply, but the reason why the prosecco was served. The provision of premises, in which a civil wedding can legally be carried out, is beyond the “passive letting of land” and “outside the scope” of the exemption in VATA 1994, Sch. 9, Grp. 1.
BCH appealed to the UT, which considered whether:
- as BCH contended, the hire of the Tamarisk Room was a supply of the leasing or letting of immovable property (and exempt); or
- a supply of something other than a leasing or letting of immovable property (and standard-rated, as HMRC argued).
There was no challenge to the FTT's findings of fact. Thus, there was no appeal in relation to the FTT's decision that the supply of the hire of the Tamarisk Room was a separate supply, even where it was sold as a part of a wedding package.
The UT held (at para. 30 of the decision) that in order to be a supply of the leasing or letting of immovable property, a transaction between an owner of an interest in a property (“the landlord”) and another person (“the tenant”) must:
- confer on the tenant the right to occupy the property as if the tenant were the owner;
- allow the tenant to exclude from enjoyment of such a right persons who are not permitted by law or by the contract to exercise a right over the property;
- be for an agreed period, which may be restricted, but must not be occasional and temporary; and
- be in return for payment.
There was no dispute that the supplies by BCH to persons hiring the Tamarisk Room were for an agreed period and in return for payment. The UT focused on the following two questions:
- Did customers have a right to occupy the Tamarisk Room as owner and exclude any other person from the enjoyment of such a right?
- Did BCH add any significant value to the hire of the space?
Paragraph 12 of Marriages (Approved Premises) Regulations 1995, Sch. 2 allows public access to the room only to attend the wedding ceremony and does not allow members of the public to occupy the room for other purposes or at other times. However, the mere fact that the customer could not assert exclusivity with respect to members of the public exercising their rights of access did not stop the occupation having the necessary quality of exclusivity to amount to a letting of immovable property within the Principal VAT Directive, art. 135(1)(l). As any owner would be subject to the rights of access provided as a matter of law, such rights of access are not inconsistent with a right to occupy as an owner (para. 38 of the decision). That conclusion did not resolve the appeal in BCH's favour. It was necessary to consider whether, having regard to all the circumstances, the objective nature of the supply was one of the letting of immovable property. In the context of this appeal, the remaining question to be considered was whether, having regard to what was provided by BCH, the supply amounted to more than a “relatively passive activity linked solely to the passage of time and not generating any significant added value” (para. 39 of the decision).
The FTT considered whether BCH added significant value to the simple provision of space when it hired out the Tamarisk Room to customers.
The FTT held that the service provided by BCH was not simply making a room available to the customers: it was the provision of an approved room for a marriage ceremony. The Tamarisk Room had to be a seemly and dignified venue for such proceedings and BCH had to meet the obligations imposed by the Approved Premises Regulations, such as making a responsible person available and supervising the use of the room. That was a more complicated service than simply making the property available to the customer for a period. BCH actively exploited the Tamarisk Room by obtaining approval for its use for the solemnisation of marriages (and the formation of civil partnerships) and performing all the required activities to maintain such approval. Those activities went further than simply ensuring that the use by the customers of the Tamarisk Room was not disturbed by third parties. By actively exploiting the Tamarisk Room, BCH added significant value to the supply of the room. Thus, the supply of the Tamarisk Room was outside the scope of the exemption for the leasing and letting of immovable property (para. 44 of the decision).
Thus, BCH's appeal failed.
This case illustrates the difficulties of deciding whether a transaction with various elements amounts to a single supply or multiple supplies. The outcome is fact sensitive. Different minds may reach different conclusions. A single price may be paid for a package of items...
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