Colaingrove Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE JACOB |
| Judgment Date | 16 April 2003 |
| Neutral Citation | [2003] EWHC 821 (Ch) |
| Court | Chancery Division |
| Date | 16 April 2003 |
| Docket Number | Case No: GLC 210/02 |
[2003] EWHC 821 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Jacob
Case No: GLC 210/02
Roderick Cordara QC and David Scorey (instructed by Eversheds) for the Appellant
Rupert Anderson (instructed by Commssioners for Customs & Excise) for the Respondents
Hearing dates : 3 April 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HON MR JUSTICE JACOB
This is an appeal from a decision of the VAT Tribunal (Mr Theodore Wallace) given on 20 th July 1999. Quite why it has taken so long to reach this court I do not know. It does not matter much but one hopes that in future appeals will not take this long to come on.
The appellants operate 22 caravan parks in the United Kingdom containing between them 20,000 pitches, 14,500 of these are let to caravan owners. This case is concerned with those lettings. The owners keep their caravans on average for about 8 years, although they have a right of termination of their agreement upon giving 2 months' notice. A 6-month notice the other way can also be given. The appellant's customers are given no interest in land. They have no more than a licence to occupy the site.
There are restrictions as to what the owners can do on the sites. In particular they may not live in their caravans as a permanent address and may not stay overnight the 3 months December to February. During those 3 months they can have access to their caravans but not stay. The caravan sites have the sort of amenities one would expect for a holiday site such as swimming pools, entertainment facilities and so on. In essence, therefore, what the appellants provide their customers with is a place to keep their caravans for holiday use and not permanent residential use. The customers are free (during the permitted times only) to let their caravans for use by others. Some do this. Others chose to live in their caravans over the summer.
The appellants say that the services they provide are not chargeable to VAT. The Tribunal held otherwise. Before me the appellants say that they have a good enough point that there should be a reference to the European Court of Justice. The Commissioners say the matter is so clear that I should decide it now in their favour: there is no point in sending any questions to the Court of Justice.
I have concluded that the matter is indeed acte claire. To explain why I must first begin by reciting some of the turgid legislation concerning VAT. The key European legislation is the VAT Sixth Directive (77/388/EEC).
Art. 13 B provides:
"Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the current and straightforward application of the exemption and of preventing any possible evasion, avoidance or abuse:
…
(b) the leasing or letting of immovable property excluding:
the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites:
the letting of premises and sites for parking vehicles;
lettings of permanently installed equipment and machinery;
hire of safes.
Member states may apply further exclusions to the scope of this exemption."
I have emboldened the bits that matter. 13B thus has this structure – a general exemption relating to leasing or letting of land, four specified exclusions to that exemption and an option for member states to apply further exclusions. In argument the option was called "the tailpiece."
I should, in passing also mention Art.13(C) which gives member states a right to allow taxpayers a right of option for taxation, both generally or in a restricted form.
Finally I should mention Recital 11:
"Whereas a common list of exemptions should be drawn up so that the Communities' own resources may be collected in a uniform manner in all Member States."
The UK implemented the Directive. The current version of the implementation is the Value Added Tax Act 1994. Schedule 9 Group 1 of the 1994 Act specifies that the following shall be exempt from VAT:
"1. The grant of any interest in or right over land or 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 the supply of catering;
(e) the grant of any interest in, right over or licence to occupy holiday accommodation;
(f) the provision of seasonal pitches for caravans, and the grant of facilities at caravan parks to persons for whom such pitches are provided;
(g) the provision of pitches for tents or of camping facilities;
(h) the grant of facilities for the parking of a vehicle;
…"
The Notes to Group 1 include:
"(13) "Holiday accommodation" includes any accommodation in a building, hut…, caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use, but excludes any accommodation within paragraph (d).
(14) A seasonal pitch is a pitch—
(a) which is provided for a period of less than a year, or
(b) which is provided for a year or a period longer than a year but which the person to whom it is provided is prevented by the terms of any covenant, statutory planning consent or similar permission from occupying by living in a caravan at all times throughout the period for which the pitch is provided."
Note 14(b) obviously covers exactly what the appellants do: they provide seasonal pitches as defined. The appellants concede that. So there is no doubt that if the UK legislation is valid, then their activities are subject to VAT. The question therefore is, is the UK legislation permitted or is it beyond the powers given by the Directive? The Commissioners say it is, either because it is an implementation of the emboldened bit of the hotel sector exclusion or because it is permitted by the tailpiece.
The Tribunal was doubtful about the hotel sector exclusion justifying the seasonal pitch provisions – a right to keep a caravan on a piece of concrete on a long term basis, albeit in a site with facilities, is getting a bit far from the concept of a hotel. If the case had turned on that, it said it would have referred a question to the ECJ. However it then went on to hold that the provision was legitimised by the tailpiece.
I too have reservations about whether the provision of a seasonal pitch can properly be described as being in the hotel sector or in a sector with a similar function. There is a permanency about a seasonal pitch absent from the hotel function which may take it outside the notion intended by the exemption. Moreover seasonal pitches are not really in competition with hotels – a factor considered by the ECJ to be important in Blasi v. Finanzamt Munchen Case C-346/95 [1998] STC 336 at 345 where the ECJ said at para. 20:
"…..the words 'sectors with a similar function' should be given a broad construction since their purpose is to ensure that the provision of temporary accommodation similar to, and hence in competition with, that provided in the hotel sector is subject to tax".
Finally on this point there is the problem caused by the word "accommodation" – a piece of concrete is hardly that, though it is fair to note that the exemption includes camp sites by way of example and thus would include a piece of ground for pitching a tent. So "accommodation" may have a wide meaning.
Thus I cannot say that the UK provision bringing seasonal pitches into tax is clearly legitimised by Art. 13B(b)1. I, like the Tribunal, would have referred the matter if that had been the key question. But it is not. For what matters is the tailpiece. Does that permit the UK to bring seasonal pitches into tax? Mr Cordara QC for the taxpayer argues that the UK provision which purports to do so is invalid. It is to that question I now turn.
I begin by observing that the general principle of construction of EU instruments – that exceptions are to be construed narrowly – does not apply to the tailpiece. This is for the obvious reason that it is not an exception. On the contrary it empowers Member States to derogate from an exception. There is clear authority that that power is wide, both from speeches of Advocates General and the Court itself:
(a) In Blasi Jacobs A-G put it this way at paragraph 12:
"The last sentence of art 13B(b) is broadly worded so as to allow the member states a large degree of discretion in placing limits on the scope of the exemption in art 13B(b). As the Court stated in Henriksen [1990] STC 768 at 779, [1989] ECR 2763 at 2782, para 21 "member states are free to limit the scope of the exemption by providing for additional exclusions". Unlike exemptions, which generally fall to be construed narrowly...
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Colaingrove Ltd v Commissioners of Customs and Excise
...item 1(b), Note (14)(b) - Council Directive 77/388, art. 13(B)(b). This was an appeal by the taxpayer from a decision of the High Court ([2003] BVC 436) dismissing an appeal from the decision of a tribunal (No. 16,187; [2000] BVC 2054) that the legislature was entitled to exclude caravan pi......