HM Revenue and Customs v Tallington Lakes Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE DAVID RICHARDS,Mr Justice David Richards |
| Judgment Date | 10 August 2007 |
| Neutral Citation | [2007] EWHC 1955 (Ch) |
| Docket Number | Case No: CH/2007/APP/0135 |
| Court | Chancery Division |
| Date | 10 August 2007 |
[2007] EWHC 1955 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE VAT & DUTIES TRIBUNAL
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice David Richards
Case No: CH/2007/APP/0135
Nicola Shaw (instructed by HM Revenue & Customs Solicitors) for the Appellants
Neil Morgan (director of Tallington Lakes Ltd) for the Respondent
Hearing dates: 29 June 2007
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 Honourable
This is an appeal by the Commissioners for HM Revenue and Customs (HMRC) against a Decision of the VAT & Duties Tribunal (Miss J C Gort and Mr T A Marsh) released on 9 January 2007, that supplies of caravan pitches by the respondent, Tallington Lakes Limited (the company), were for VAT purposes, exempt supplies of land and not standard rated supplies of seasonal pitches for caravans. On this appeal and before the Tribunal, HMRC appeared by counsel and the company was represented by a director, Neil Morgan, who also gave evidence before the Tribunal.
The appeal concerns a voluntary disclosure made by the company on 22 July 2004 for a repayment of VAT amounting to £128,613 paid by the company on pitch rents for the period 1 January 2001 to 31 December 2003 and an assessment to tax of £16,083 and interest for the period 03/04.
The basis for the voluntary disclosure was that the company considered that the nature of the supply of the caravan pitches was an exempt supply of land and accordingly that no VAT should be payable in respect of the pitch rents. It completed its VAT return for the period 03/04 on the basis that it was making exempt supplies of land and submitted a voluntary disclosure to recover VAT which had historically been accounted for in respect of the rents.
The background facts are conveniently set out in paragraph 2–4 of the Tribunal's decision:
“2. The [company] owns a property known as Tallington Lakes which is a large area of some 350 acres, 200 acres of which is lake. Originally gravel had been extracted from the site in the 1940s and 50s. In the late 1970s or early 1980s the site was acquired in order to be used for water skiing, and that use continues to this day, although today such use is ancillary. From the mid 1980s the land became used as a caravan site, and planning permission was granted for 385 caravans. At present about 225 caravans are on the site. The issue of planning permission is complicated and it is a matter which we will set out in more detail below.
3. The [company] operates a leisure complex at Tallington Lakes, and, inter alia grants licences to owners of static caravans to occupy concrete pitches which it provides. It was registered for VAT with effect from 1 January 1982. At some point an accountant working for the company agreed that VAT at the standard rate should be charged on the granting of the licences, and it was in respect of those payments that the voluntary disclosure was made.
4. The pitches are provided to private individuals, each of whom owns his or her own caravan or mobile home. The [company] is also in the business of selling mobile homes and in addition lets off a small portion of the site for use by touring caravans and campers, for which there are some 70 pitches in a separate area. There are 6 caravans which are rented out for holiday accommodation, which again are treated differently for tax purposes. These are on the same site as the pitches available for touring caravans. There is on this side a shower block and amenities for use by the owners of the touring caravans and the people who rent the caravans from the company, which is near to the office and is under the control of the staff there. The pitches which are the subject of this appeal are scattered throughout an area which is mainly around the lake, along about three miles of road. There is a restaurant and a bar facility in the middle of the site for everybody's use. The mobile homes themselves are anchored by metal straps and chains, and have the towing bar and the wheels removed. They are permanently connected to the electricity mains and to a gas supply. There is a permanent BT connection.”
The relevant statutory provisions are contained in the Value Added Tax Act 1994. Supplies which are exempt from VAT are listed in schedule 9, and item 1 of group 1 exempts the grant of any interest in or right over land other than certain categories including:
“(f) the provision of seasonal pitches for caravans, and the grant of facilities at caravan parks to persons for whom such pitches are provided;”
“Seasonal pitch” is defined by note 14 to item 1 as follows:
“(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…”
This legislation is derived from article 13B(b) of the Sixth Directive (77/388/EEC) which exempts supplies by way of leasing of “immovable property”:
“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 correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:
…
(b) the leasing or letting of immovable property excluding:
(1) the provision of accommodation, as defined in the laws of 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…
Member States may apply further exclusions to the scope of this exemption;”
In Colaingrove Ltd v Customs and Excise Commissioners [2004] STC 712, the Court of Appeal held that the closing words of article 13B(b) (the tailpiece member state option) entitled the United Kingdom to provide for the supply of “seasonal pitches” (as defined) as an exclusion from the general exemption for the leasing or letting of land from VAT.
On this appeal HMRC submits that the Tribunal made errors of law, including a failure to construe and apply correctly the definition of seasonal pitch, and made findings of fact which could not be supported on the evidence.
HMRC's case before the Tribunal and on this appeal is that the pitches supplied by the company fall within the definition of seasonal pitches because of both the terms and conditions on which they were supplied and because of the terms of the relevant planning permissions. These prevented occupation by living in caravans or mobile homes on the pitches for the whole of February each year.
The evidence before the Tribunal as regards relevant permissions for the periods in issue comprised principally an annex to a site licence issued under section 3 of the Caravan Sites and Control of Development 1960 and a letter dated 22 March 2005 from the Development Control Services department of the local authority to HMRC. The site licence in evidence was issued in 2003, although in paragraph 8 of its decision the Tribunal refers to a licence being granted in the 1980's. One of the conditions on the face of the licence is that “static holiday caravans shall be sited in accordance with Annex A which forms part of this licence.”
Annex A to the site licence sets out planning permissions for use of the company's land as a caravan site granted under Part III of the Town and Country Planning Act 1990. The annex lists seven permissions applicable to twelve areas. The local authority's letter states that three of the permissions were subject to a planning condition that “No caravan on the site shall be occupied between 31 January and 1 March in any year”.
The tribunal found that the planning condition applied to three areas of the total site. In so finding, HMRC submits that the Tribunal overlooked that the annex demonstrates that the three permissions in question (reference numbers SK92/1328, SK 93/0189 and SOO/0407) apply to seven out of the 12 areas. I agree with this submission. The total number of caravans permitted on those sites is 258 out of a permitted maximum of 385. There is no challenge to the Tribunal's acceptance of the company's evidence that one of the areas, with a permitted maximum of 52 caravans, had never been used.
Licences to occupy caravan pitches were granted by the company for a period of twelve months, renewable on 1 April each year. The unchallenged evidence before the Tribunal was that they were granted under standard terms and conditions, of which clause 7 provided:
“The Licensee and all persons occupying the mobile home shall occupy the home for private residential purposes only and no trade or business of any description shall be carried out in or from it. In accordance with the planning permission no mobile home shall be occupied during the month of February. The mobile home may be used as a principal private residence.”
The Tribunal held that neither the planning condition nor clause 7 of the terms and conditions was enforceable and that accordingly the licencees were not prevented by either from occupying the pitches throughout the year. The provision of the pitches was not therefore within paragraph (f) of the exception to item 1 of group 1, schedule 9 and was therefore exempt from VAT. In reaching this conclusion, the Tribunal found the following facts:
(i) At no time had the...
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