Clowance Owners Club Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 October 2004 |
| Date | 08 October 2004 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Appleby Bowers v C & E CommrsVAT [2001] BVC 341
C & E Commrs v Plantiflor LtdVATVAT [2002] BVC 572 (HL); [2000] BVC 103 (CA)
Canary Wharf LtdVAT No. 14,513; [1997] BVC 2,058
Card Protection Plan Ltd v C & E CommrsVATVAT (Case C-349/96) [2001] BVC 158 (HL); [1999] BVC 155
Clowance Holdings LtdVAT No. 17,289; [2001] BVC 4,157
Hazelwood Caravans and Chalets LtdVAT No. 1923; (1985) 2 BVC 205,330
Quaysiders Club LtdVAT No. 17,204; [2001] BVC 4,137
The Forest Hill Trossachs Club v Assessor for Central Region 1992 SLT 295
Trustees of the Nell Gwynn House Maintenance Fund v C & E CommrsVAT [1999] BVC 83
Supply - Charges for timeshare accommodation - Whether cost components in a single onward supply of facilities to timeshare owners or a basket of services including certain charges as disbursements - Directive 77/388, the sixth VAT directive, art. 11(A)(1) to (3); Value Added Tax Act 1994, s. 19(1) and (2).
The issue was whether the supply of timeshare facilities by the appellant to individual timeshare owners comprised a single composite supply of standard-rated facilities or separate services including disbursements.
The appellant was one of a number of legal entities associated with the ownership, administration and management of the Clowance Estate and Country Club in Cornwall. The estate comprises 108 timeshare apartments and lodges together with a comprehensive range of sports facilities situated in 97 acres of landscaped parkland. Management of the estate is structured through a number of different legal entities in accordance with a variety of legal documents. A long-lease of the estate had been granted to The Clowance Trust which, in turn, had granted individual ownership certificates to owners of a contractual licence over part of the estate, with consideration for the grant of that contractual interest passing to Clowance Holdings Ltd. Individual owners entered into agreements with Clowance Holdings Ltd and The Clowance Trust under which they agreed to be bound by the memorandum and articles of association of the appellant Owners Club. The appellant entered into a management agreement with Clowance Estate Management Company Ltd, Clowance Holdings Ltd and The Clowance Trust. The individual timeshare owners were thereby tied into the management structure established by the management agreement. A management fee was charged by the appellant to the timeshare owners, with VAT being charged on services such as maintenance, cleaning etc, but with certain items being treated as VAT-free disbursements. These were business rates, insurance, television licences, water and sewerage rates, charitable trust donations and owners club loan interest and repayments. The commissioners ruled on 14 June 2002 that the appellant's supply to the timeshare owners was a single supply of standard-rated facilities.
In June 2001, the tribunal heard an appeal by Clowance Holdings Ltd and decided that management charges paid by timeshare owners to Clowance Estate Management Company Ltd were made up of a number of component parts, each of which had to be examined to see whether it bore VAT (Clowance Holdings Ltd No. 17,289; [2001] BVC 4,157). The tribunal held that VAT was not due on insurance, rates, water and sewerage, loan repayments and television licences. The main argument for the appellant in the present case was that the disputed decision of the commissioners ignored much of the decision in the previous appeal. The appellant stated that individual timeshare owners were responsible for certain payments and it was acting as their agent in making such payments. It claimed that the disputed charges made to individual timeshare owners were disbursements. The commissioners argued that the decision of the tribunal in the previous appeal did not apply to the circumstances of the present appeal because in the earlier case the disputed supplies had been made between the Clowance VAT Group and the appellant, whereas in this case the supplies were between the appellant and the individual timeshare owners. The commissioners submitted that the disputed items were cost components of the appellants' onward supply of standard-rated facilities; they could not be treated as disbursements because they were supplied to the appellant and not to the individual timeshare owners. Alternatively, the commissioners submitted that the conditions necessary for the disputed items to qualify as disbursements had not been satisfied.
In evidence, the appellant submitted that there was not a single standard-rated supply of facilities to the timeshare owners, because the disputed items were not part of the maintenance and related services supplied by the appellant to the individual owners. The costs were paid by the appellant as agent for the owners. The onward charges to the owners satisfied the conditions for being disbursements as set out in para. 5.6 of Notice 709/3/02. Alternatively, the appellant submitted that recharges made in respect of rates, television licence fees and the charitable levy were not consideration for any supply for VAT purposes. The appellant submitted that if the tribunal were to decide that it was making a single standard-rated supply of services, Extra-statutory Concession 3.35 in Notice 48 (2002 edn) should apply allowing apportionment of the consideration between the differing VAT liabilities of the constituent part of the supply, these being either exempt or outside the scope of VAT.
Held, dismissing the company's appeal:
1. The judgment of the House of Lords in C & E Commrs v Plantiflor Ltd [2002] BVC 572 reversed the decision of the Court of Appeal, which had been referred to in the tribunal's decision in Clowance Holdings Ltd No. 17,289; [2001] BVC 4,157. With regard to the argument that an agency existed between the appellant and the timeshare owners, the legal interpretation was altered adversely for the appellant.
2. Adapting the principles established in Plantiflor and Trustees of Nell Gwynn House Maintenance Fund v C & E Commrs [1999] BVC 83, the tribunal decided that generally the relationship between the appellant and the individual timeshare owner was not that of agent and principal. An agency relationship would only apply in respect of each item where it was found to be a genuine disbursement.
3. The television licences were issued to individual timeshare units and the recharge of their cost by the appellant constituted a disbursement for VAT purposes. However, payment of the remaining recharged items: non-domestic rates, water rates, property insurance, charitable trust donations and loan interest was the responsibility of the appellant. The recharges could not be treated as disbursements.
4. Save for the television licences, none of the services was supplied direct to the individual timeshare owners. Each was supplied and invoiced to one of the companies in the Clowance group. In substance and reality, the charges represented cost components of the overall supply of managed accommodation by the appellant.
5. The structure created by the appellant demonstrated that it had to provide management and maintenance services for the benefit of the timeshare owners. This was a single composite supply.
6. Except to the extent of the television licence fees, the appeal was dismissed.
1. Clowance Owners Club Limited (the Owners Club/the Appellant) appeals against a decision of the Respondents (Commissioners/Customs) dated 14 June 2002 that the Appellant's supply of timeshare facilities to individual timeshare owners comprises a single supply of standard rated facilities.
2. Article 11 of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of member States relating to turnover taxes - common system of value added tax: uniform basis of assessment, 77/388/EEC ("the Sixth VAT Directive") provides for the determination of the taxable amount of a supply. Article 11(A)(1) reads as follows:
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(1) The taxable amount shall be:
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(a) in respect of supplies of goods and services other than those referred to in (b), (c) and (d) below, everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies, including subsidies directly linked to the price of such supplies.
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Article 11(A)(2) states that:
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(2) The taxable amount shall include:
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(a) taxes, duties, levies and charges, excluding the value added tax itself;
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(b) incidental expenses such as commission, packing, transport and insurance costs charged by the supplier to the purchaser or customer. Expenses covered by a separate agreement may be considered to be incidental by the member states.
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3. In contrast, Article 11(A)(3) provides that the taxable amount shall not include:
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(a) price reductions by way of discount for early payment;
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(b) price discounts and rebates allowed to the customer and accounted for at the time of the supply;
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(c) the amounts received by a taxable person from his purchaser or customer as repayment for expenses paid out in the name and for the account of the latter and which are entered in his books in a suspense account. The taxable person must furnish proof of the actual amount of his expenditure and may not deduct any tax which may have been charged on these transactions.
4. Section 19 VATA 1994 sets out the domestic UK provisions relating to the calculation of the taxable amount in a given supply. Section 19(1) provides as follows:
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(1) for the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section and Schedule 6, and for these purposes subsections (2) to (4)...
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Richmond Park Maintenance Ltd
...is not necessary helpful. However, the Tribunal considers that the above conclusions are consistent with Clowance Owners Club LtdVAT[2005] BVC 2169, a case to which the Tribunal was referred. [66]The Appellant's arguments in relation to disbursements are therefore rejected.Conclusion [67]Fo......