Colaingrove Ltd (Verandahs)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 June 2013 |
| Neutral Citation | [2013] UKFTT 343 (TC) |
| Date | 12 June 2013 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 343 (TC)
Judge Charles Hellier, Tym Marsh MA, MBA.
Roderick Cordara QC instructed by PwC Legal LLP appeared for the Appellant
Jeremy Hyam instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
VAT - zero rating of caravans - supply of caravan with a verandah - whether a single supply or two supplies - test to be applied in context of zero rating.
The First-tier Tribunal decided that the verandahs attached to the caravans sold by a taxpayer company were not zero-rated within the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9. The verandahs were optional extras even though their purpose was to serve the caravans. Thus, the verandahs were neither incidental to nor integral with the caravan.
The taxpayer sold static caravans, some of which were sold with verandahs. Each verandah was supported by legs or posts along its edges. The outer posts were co-linear with the handrail posts. The posts rested on, but were not fixed to, concrete pads in the site. The verandah was attached to the caravan by a bar, which slid under the chassis of the caravan and was clamped to it.
HMRC rejected the taxpayer's "voluntary disclosures" of overpaid VAT in respect of the periods March 1989 to June 2004 and December 2004 to June 2008. They held that the taxpayer's sale of caravans consisted of two separate supplies: one of a zero-rated caravan and the other of a standard-rated verandah.
The taxpayer contended that its sale of caravans with verandahs was a single zero-rated supply. Under the Caravan Sites and Control of Development Act 1960 ("CSCDA 1960"), "caravan" meant "any structure designed or adapted for human habitation which [was] capable of being moved or towed from one place to another". A caravan with its verandah was within that definition.
HMRC contended that "caravan" still carried connotations of its Persian, "wandering" derivation. Although the verandah was not fixed to the ground, it was adapted or designed to be in a fixed place and not to be taken from one place to another.
The Tribunal held that the definition given in CSCDA 1960 did not necessarily transfer to VATA 1994. Whilst "static" caravans retained enough possibility of movement and similarity with moving caravans to justify the epithet "caravan", the attached verandah did not fall within that word.
The verandah served the caravan and promoted its enjoyment. However, the verandah was subordinate to the caravan. The verandah was attached to the caravan but looked like an addition to the caravan, rather than an extension of it. It was not necessary to the caravan, although the verandah was of little use without the caravan. The verandah had no purpose without the caravan, but the caravan could be acquired without a verandah. It was an optional extra even though its purpose was to serve the caravan. Thus, the verandah was neither incidental to nor integral with the caravan.
By contrast, a set of steps leading up to a caravan door was merely incidental to or integral with the caravan - they were a minor addition to the purchase of a caravan. The same could be concluded in relation to a verandah supplied with a caravan, which had patio doors or French windows at the front. If those doors were the only entrance to the caravan, a set of steps up to them would be necessary and an integral part of the caravan. However, a verandah was not a necessary adjunct of patio doors or merely incidental to the caravan. This was a case where the domestic approach gave rise to a different result. That should have been the result intended by Parliament, and that intention defined the scope of the zero rating. Thus, the verandahs were not zero-rated within VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9.
The taxpayers will learn that while a patio attached to a house may be zero- rated, the same is not true for verandahs attached to caravans. The taxpayers must read this case together with Colaingrove [2013] UKFTT 312 (TC), where the same Tribunal explained that the zero rating policies for caravans and house are two different regimes. For commentary on zero-rating for caravans and houseboats under VATA 1994, Value Added Tax Act 1994 schedule 8 group 9Sch. 8, Grp. 9, see CCH Tax Reporter at 22-775.
[1]Among other activities, Colaingrove sells static caravans.
[2]The sale of static caravans is zero rated by virtue of Value Added Tax Act 1994 schedule 8 group 9Group 9 Schedule 8 VATA 1994.
[3]Some of the caravans are sold with verandahs. The issue in this appeal is whether such a sale is a single (zero rated) supply, as the appellant maintains; or two separate supplies, one of a zero rated caravan and the other of a standard rated verandah, as HMRC maintain.
[4]The appeal arises from HMRC's rejection of "voluntary disclosures" of overpaid VAT made by the appellant in respect of the periods 03/89 to 06/04 and 12/04 to 06/08.
[5]We heard oral evidence from Dermot King, who after participating in the audit of Colaingrove's accounts in 1987 joined the company in about 1989 and is now its company secretary. We saw pictures of caravans (with and without verandahs) and copies of invoices for their purchases and of the terms of their supply.
[6]The verandahs consisted of a boarded area abutting at least two sides of the caravan. The level of the verandah deck corresponds to the level of the floor of the caravan. The area of the verandah along the longer side of the caravan has the width of a comfortable walkway; the area at the front of the caravan is wider and large enough to accommodate chairs and tables for outdoor living. The verandah is not covered. The edge of the verandah away from the caravan is bounded by posts and a handrail with the glazed panels. The area of the verandah could in our estimation be about a third or more of the combined area of the van and the verandah.
[7]A verandah is supported by legs or posts along its edges. The outer posts are colinear with the handrail posts. The posts rest on, but are not fixed to, concrete pads in the site. The verandah is attached to the caravan by a bar which slides under the chassis of the caravan and is clamped to it.
[8]The design of a particular verandah will be dependent upon the profile of the ground on which it is placed that is to say the profile of the pitch (a steeper pitch will require longer legs in some places and will affect the siting of the steps to the verandah) and the type of caravan. The verandah will generally incorporate steps leading up to it. Entrance to the caravan will be via the steps to the verandah, and from the verandah into the caravan.
[9]Some caravans have a patio sliding door entrance across the front of the caravan (or outward opening French doors). These caravans require some sort of entry platform. Mr King told us that he did not know of such a caravan which had been bought without a verandah and that for safety reasons such caravans were sold only with a verandah. We accept that these caravans were always bought from Colaingrove with verandahs.
[10]The appellant sources the caravans and verandahs from different suppliers. Once the caravan has been put in position on its site the verandah would be fitted. The customer would be given access when the fitting was complete.
[11]Caravans with verandahs were generally sited in designated areas of caravan parks because they required a large pitch. As a result those customers who had verandahs almost always purchased them at the time they purchased the caravan. Only a very few (less than 10%) of the verandahs were sold after the sale of the caravan.
[12]Over the period since that of the first disputed voluntary disclosure, the way in which those caravans which were supplied with verandahs were described on the invoices to the customer had changed. More recent invoices (2012) show the various elements of the purchase and their prices separately; earlier invoices (1997 to 2006) showed the elements of the purchase (the verandah, a gas bottle, inventory, television aerial etc) separately, but only a single undivided price.
[13]It was possible that a customer might decide to move from one caravan park to another. If so the caravan and the verandah would both be moved, but the verandah would require adjustment to ensure that its legs met the ground on the new site. In such a move the verandah was likely to be transported separately.
[14]Since the period of the voluntary disclosures some manufacturers had produced caravans with integral covered verandahs at the front accessed by patio doors.
[15]Mr King said, and we accept, that customers purchased caravans with verandahs for three reasons:
(2) because the verandah extended the available living space by creating an outdoor area similar to a patio or decking outside a house;
(3) because the pitch was uneven and without the verandah there would be no stable entrance; or
(4) to facilitate access where the addition of steps directly to the caravan door would be awkward because of the profile of the pitch, and the steps to the verandah could be placed at a more convenient place.
[16]With effect from 1992 eu-directive 77/388 subsec-or-para 2 article 28article 28(2) of the Sixth Directive permitted a derogation from the obligation to charge VAT at the standard rate for domestic zero rating provisions which were in force on 1 January 1991. (Prior to 1992 a similar derogation applied by reference to zero rating in force on 31 December 1975).
[17]Pursuant to this derogation the UK maintained the zero rating for caravans which is now in Value Added Tax Act 1994 schedule 8 group 9Group 9 Schedule 8 VATA 1994, but which had been in force in predecessor provisions in and before 1991. The group specifies the...
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Serpentine Trust Ltd
...as explained later by the CJEU in CPP and Levob (a wider test) . Put simply, the question the FTT in Colaingrove Ltd (Verandahs)TAX[2013] TC 02746 was attempting to answer was the extent of Talacre Beach Caravan Sales Ltd v C & E CommrsECAS (Case C-251/05) [2007] BVC 366 and whether and whe......