HM Revenue and Customs v Bryce (trading as The Barn)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 January 2011 |
| Neutral Citation | [2010] UKUT 26 (TCC) |
| Date | 24 January 2011 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2010] UKUT 26 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Roth J.
Peter Mantle (instructed by the Solicitor to HM Revenue and Customs) for the appellants.
Roly Pipe, tax adviser, for the respondent.
The following cases were referred to in the judgment:
Belgium v Temco Europe SAECASVAT (Case C-284/03) [2007] BVC 308; [2004] ECR I-11237
Beynon & Partners v C & E CommrsUNKVATWLR [2004] UKHL 53; [2005] BVC 3; [2005] 1 WLR 86
Card Protection Plan Ltd v C & E CommrsECASVAT (Case C-349/96) [1999] BVC 155; [1999] ECR I-973
Card Protection Plan Ltd v C & E CommrsUNKVATELR [2001] UKHL 4; [2001] BVC 158; [2002] 1 AC 202
College of Estate Management v R & C CommrsUNKVATWLR [2005] UKHL 62; [2005] BVC 704; [2005] 1 WLR 3351
C & E Commrs v Sinclair Collis LtdUNKVAT [2001] UKHL 30; [2001] BVC 378
David Baxendale Ltd v R & C CommrsUNKVAT [2009] EWCA Civ 831; [2009] BVC 663
Levob Verzekeringen BV v Staatssecretaris van FinanciënECASVAT (Case C-41/04) [2007] BVC 155; [2005] ECR I-9433
Ministero dell'Economia e delle Finanze v Part Service SrlECASVAT (Case C-425/06) [2010] BVC 443; [2008] ECR I-897
R & C Commrs v DenyerUNKVAT [2007] EWHC 2750 (Ch); [2008] BVC 694
R & C Commrs v Weight Watchers (UK) LtdUNKVAT [2008] EWCA Civ 715; [2009] BVC 91
Sea Containers Services Ltd v C & E CommrsVAT [2000] BVC 60
Sinclair Collis Ltd v C & E CommrsECASVAT (Case C-275/01) [2003] BVC 374; [2003] ECR I-5965
"Siberië" vofECASVAT (Case C-158/98) [1999] BVC 353; [1999] ECR I-3971
Value added tax - Single or multiple supplies - Test where no single principal supply existed - Land exemption - Supply of hall with play equipment and catering for children's parties - Whether single price should be apportioned between identified elements - Whether supply of use of hall exempt supply of land.
This was an appeal by HM Revenue and Customs against a decision of the First-tier Tribunal (FTT) ([2009] UKFTT 298 (TC); [2010] TC 00242) that the taxpayer's made separate supplies of a play space in a barn where children's parties took place and of refreshments and that the supply of the barn was an exempt supply of land.
The taxpayer carried on business at a property known as The Barn in Ipswich. It was in the main a day-care nursery for very young children. Children's parties, craft parties and cookery parties also took place at The Barn. Most of the taxpayer's supplies, those relating to the day-care nursery, the craft parties and the cookery parties, were accepted as being liable to VAT at the standard rate.
A dispute arose concerning the children's parties, which the taxpayer contended were exempt supplies, being the grant of a licence to occupy land, pursuant to the Value Added Tax Act 1994, Sch. 9, Grp. 1, item 1. The taxpayer maintained that although there were three components of the supply, namely the licence to occupy the hall, the use of play equipment and refreshments, there was, for VAT purposes, only a single exempt supply of land. HMRC took the view that the supplies were properly characterised as supplies of children's parties and were standard-rated for VAT purposes. They argued that each supply had a number of features with more or less equal prominence which, when taken together, could not be said to amount to the supply of land.
The FTT held that, although the parties were offered by the taxpayer as a package, it was possible to split the supply into two independent elements, the use of the hall and the refreshments, which were not so closely linked that the purchase of one without the other would have been of no use for the customer's economic purpose, which was to entertain the children ([2009] UKFTT 298 (TC); [2010] TC 00242). HMRC appealed.
Held, allowing the appeal:
1. There was a significant error in the approach of the FTT. The test which they applied was to ask whether the use of one of the two elements, i.e. the hall and the provision of refreshments, would have been of use to customers and thus served their economic purposes, without the other. However, that was not the test. The fact that parents might have been interested and found value in the purchase only of use of the hall or only of the provision of refreshments in the café room was not relevant in determining whether, from the perspective of a typical customer, objectively viewed, what was in fact being supplied was as a matter of economic reality to be regarded as a single supply for VAT purposes. Accordingly there had been a misdirection of law which vitiated the FTT's analysis and, therefore, the Upper Tribunal was required to make a fresh determination on the evidence and facts as found by the FTT. (R & C Commrs v Weight Watchers (UK) Ltd [2008] EWCA Civ 715; [2009] BVC 91 and David Baxendale Ltd v R & C Commrs [2009] EWCA Civ 831; [2009] BVC 663 applied.)
2. The question whether some elements in the supply were ancillary to one principal supply was relevant in determining whether there was a single or multiple supply. But if the case was not one where there was a single, principal supply, then the question whether the various elements were so closely linked as to form, from the customer's perspective, a single, indivisible economic supply, was to be determined by looking at all the significant elements of the transaction. Thus, the FTT fell into error in effectively disregarding all those elements of the transaction that it had previously found were ancillary, so that in its determinative reasoning it considered only the two elements of the use of the hall and the provision of refreshments. Once all of the elements of the transaction were brought into account, the court had no hesitation in finding that, from the perspective of the customer, what was supplied was a group of facilities for a children's party, provided as a single supply, which it would be artificial to split.
3. In the light of that conclusion, the land exemption issue became academic. However, it appeared that the supply of the hall did not fall within the land exemption, properly construed. The charge for a play party was determined on the basis of a fee per child. The customer did not pay a flat fee for rental of the play barn, and if payment was made for 20 children then there was no right to bring 25. Although there was no limit on the number of accompanying adults, that aspect of the transaction appeared to be wholly inconsistent with a right of the customer to occupy as if that person were the owner.
Roth J:
1. This an appeal brought by the Commissioners for Her Majesty's Revenue and Customs (HMRC) with permission granted by the First-tier Tribunal (FTT) against its decision dated 6 November 2009 ("the Decision"; [2009] UKFTT 298 (TC); [2010] TC 00242) concerning a claim to repayments of VAT for the periods 12/04 to 9/07 inclusive. It raises the questions whether the transactions concerned involved single or multiple supplies for VAT purposes and the proper interpretation of the "land exemption" from VAT.
2. The respondent to the appeal is the taxpayer, Mrs Diana Bryce, trading as "The Barn". She has also been involved in a separate but related business trading as "Birch Farm".
3. The underlying facts were not in issue and are relatively simple. The factual evidence before the FTT comprised the oral evidence of the taxpayer, which I am told followed her written witness statement which is before this Tribunal; a printout of the website that covered both The Barn and Birch Farm; and three colour photographs. I take the facts from that undisputed evidence and the findings of the FTT (save for a minor correction to those findings which was raised on behalf of the taxpayer and not resisted by HMRC).
4. The Barn is so-called because it is a very large venue that includes a hall of 327 square metres with a high ceiling. The hall is referred to on the website as "The play barn". It resembles a sports hall with sports pitches marked out on a wooden floor. However, the venue also comprises a small reception area, a room for café seating with a small adjoining kitchen, toilets and changing facilities, including nappy changing facilities, and an upstairs room. The business of The Barn is concerned with the holding of children's parties.
5. Separately, the taxpayer is involved in the Birch Farm business, which is concerned with the operation of a day-care nursery for very young children in the 1-4 age group. That is carried on primarily at distinct physical premises from The Barn but within the same complex. The complex also includes a swimming pool.
6. The provision offered by the taxpayer for children's parties can be conveniently taken from the relevant page of the website. The page is entitled "Birthday Parties". It states:
Are you looking for somewhere to hold your child's party? Our parties are suitable for children 1-14 years and start from just £6.95 per head including food. All parties are for 2 hrs.
Weekday - 2 Hour Activity play party for under 5s - £6.95 per head including food - minimum of 6 children.
Weekend Play party - Exclusive use of the play barn for 1 hour 15 minutes followed by our hot or cold buffet all for just £8.95 per head, £3.95 for 6-12 months and under 6 months free.
Craft Parties - A choice of craft specifically chosen to suit the needs of your child's party with staff on hand to help with activities £12.50 per head includes all craft materials and a hot and cold buffet.
Cookery parties - Staff assist children to make 1 savoury and 1 sweet dish £12.50 per head includes all cookery materials and party food to follow.
7. The buffet referred to on the website was characterised in the Decision as a rudimentary buffet meal and is the standard refreshment package that was also provided by the taxpayer at other times, outside a children's party, at the price of £2 per head (including VAT).
8. Hence, during the week, The Barn is used for very...
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