Jubilee Hall Recreation Centre Ltd v The Commissioners of Customs & Excise

JurisdictionEngland & Wales
JudgeMR JUSTICE LIGHTMAN,MR HITCHMORE,MR EDWARDS
Judgment Date06 March 1997
Judgment citation (vLex)[1997] EWCA Civ J0306-9
CourtCourt of Appeal (Civil Division)
Docket NumberCO/2552/96
Date06 March 1997

[1997] EWCA Civ J0306-9

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

CROWN OFFICE LIST

Royal Courts of Justice

Strand

London WC2

Before:

Mr Justice Lightman

CO/2552/96

Jubilee Hall Recreation Centre Limited
and
The Commissioners of Customs & Excise

MR A HITCHMORE (Instructed by Messrs McKenna & Co) appeared on behalf of the Appellant

MR M KENT QC (Instructed by The Solicitor for Customs & Excise) appeared on behalf of the Respondent

1

( )

MR JUSTICE LIGHTMAN
2

I have before me an appeal by Jubilee Recreation

3

Centre Limited ("Jubilee") against a decision ("the Decision") of the London Value Added Tax Tribunal ("the Tribunal") released on the 7th June 1996 dismissing an appeal by Jubilee against a decision of the Commissioners of Customs and Excise ("the CEC"). The subject matter of the appeal is whether supplies to Jubilee in respect of the substantial refurbishment of its premises at Jubilee Hall in London's Covent Garden fall to be zero-rated for VAT purposes.

4

II. FACTS

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Jubilee is a charitable company limited by guarantee. It uses the first floor of Jubilee Hall, which is a listed building, to run a sports and fitness centre together with a café offering hot and cold dishes ("the Centre"). Jubilee also runs a sports hall called "The Armoury" in Hampstead. This case is however solely concerned with Jubilee Hall.

6

The objects of Jubilee, as set out in its Memorandum of Association and as amended on the 13th March 1989, are (so far as material) set out as follows:—

"3A … to promote and provide and maintain facilities for recreation and other leisure times occupation in or in connection with the area of the local community generally so that their conditions in life may be improved …

3B PROVIDED THAT:-

(a) The facilities to be provided shall be facilities provided either free or at a reasonable charge available to the public at large save that special facilities may be provided for persons who by reason of their youth, age, poverty or social or economic circumstances may have need of special facilities.

(b) While the persons for whom the facilities are primarily intended are the community of Covent Garden, London WC2 and its neighbourhood the use of such facilities may be extended to other members of the public who desire to and conveniently can make us of them.

(c) In this Clause the expression providing facilities includes not only the provision of land buildings equipment and other physical facilities but also the organisation of recreational and other leisure-time activities for the benefit of the public at large or (where required) of the special classes of persons mentioned in sub-paragraph (a) of this Clause.

(d) In the construction of this Clause it shall be deemed an over-riding principle that the activities to be undertaken shall be such as will further the social, moral, mental and physical welfare of the community of Covent Garden, London, WC2 and its neighbourhood by improving the conditions of life of that community."

7

There are six directors, three of whom are local residents and three work locally and use the Centre's facilities. The day to day running of the Centre, including the devising of its programme, is left to its employed manager. Jubilee employ staff at the Centre to supervise the gym, the café and reception (as well as staff at The Armoury). Jubilee hires space to freelance self employed qualified practitioners who offer treatment in a treatment centre at the Centre for osteopathy, massage, shiatsu, treatment of sports injuries and reflexology: the treatment centre also sells a very large range of health products and a range of clothing. Jubilee also allocates space to instructors to conduct classes in a wide range of activities from aerobics and acrobatics, "tight `n tone" and yoga and martial arts. Some of these classes are run by Jubilee and some as private classes run by the instructors. Virtually all the instructors are freelance and self-employed, teaching all over London. Jubilee also provides free use of the main hall of Jubilee Hall to various other local organisations.

8

The membership and pricing policy at the Centre is conveniently set out in the Decision:—

"23. At least ten different types of membership are offered by the Centre. Tariff membership is where the member pays an annual membership fee of £50 and then pays a members' activity fee for each class or weights session in the gym. Monthly gold card membership involves an all-inclusive fee and may be for gym only (£45), or classes only (£50, or both gym and classes (£60). Annual gold members also pay an inclusive fee and may choose between gym alone (£400), classes alone (£400) or both (£500). There are discounts for senior citizens, residents, children and the unemployed. Residents membership costs residents and students £35 and they pay for activities on top. Junior membership costs residents and students £35 and they pay for activities on top. Junior membership costs £7.50. The unemployed, senior citizens and the disabled are encouraged to use the Centre and are given free membership and use of the facilities for a nominal fee of £1 instead of the normal fee of £4. The Centre is open to non-members on payment of an entrance fee of £1.50. Of the 5309 members who joined Jubilee Hall last year 1851 were unemployed, 18 were disabled and 62 were local residents aged over 55. Together they represent over one-third of all members. There also company memberships, where 10 or more persons joining as a group get a discount.

26. Ms Weekes had made a survey of the word addresses of members held on the Centre's database. This showed 400 with addresses in WC2-that is the postal address of Jubilee Hall and in the adjacent areas, W1–279, SW1–160, WC1–153 and EC4–8. A large part of the membership was found to live or work locally.

29. The pricing policy at the Centre is to try and strike a balance to cover costs and keep going whilst providing for a range of users. To this end an eye is kept on what charges are being made locally. Some of the Centres' facilities are priced towards the corporate end of the market, for the small number of members who want to have what they want when they want. The object is to keep prices reasonable, and in Ms Weekes' opinion the Centre's prices are reasonable for what it offers, but in general prices are not kept down and commercial rates are charged to those to whom the Centre can charge a commercial rate while others benefit from the concessions.

30. The appellant generally makes a surplus on its activities at Jubilee Hall, which money is usually put back into this Centre and used to subsidise the activities at The Armoury. Some is used to fund a circus workshop at least two or three times a year which attracts a lot of local children but is not restricted to them. The children pay only a nominal charge. Some is used to support the Covent Garden Community Centre which is also a charity. Some is paid as donations to local hospitals and hospices and to homeless projects. A total of £5500 was donated in this way in the year 1994–95.

9

In 1993 the appellant embarked upon a substantial reconstruction of its premises. The City of Westminster granted listed building consent on the 1st July 1993 for internal alterations including improvements to changing facilities, a new mezzanine floor and the relocation of studios; and on the 19th August 1993 it granted consent for the replacement of the existing glass entrance doors with a new door. The alterations carried out by Jubilee at Jubilee Hall were approved alterations done with listed building consents obtained from the City of Westminster.

10

Jubilee is registered for VAT and makes both taxable and exempt supplies. The question raised is whether the supplies to Jubilee in respect of the refurbishment fall to be zero-rated for VAT.

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III. LAW

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The EC Sixth Council Directive on VAT in Title XVI (headed Transitional Provisions) provides in Article 28(2) that zero-rating is permissible in respect of supplies which satisfy the conditions of Article 17 of the Second Council Directive. Article 17 provides:—

"Such measures may only be taken for clearly defined social reasons and for the benefit of final consumers …"

13

Section 30 of the VAT Act 1994, which gives effect to Articles 28(2) and 17, provides (so far as is material) as follows:—

"(1) Where a taxable person supplies goods or services and the supply is zero-rated, then whether or not VAT would be chargeable on the supply apart from this section-

(a) no VAT shall be charged on the supply; but

(b) it shall in all other respects be treated as a taxable supply;

and accordingly the rate at which VAT is treated as charged on the supply shall be nil.

(2) A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 8 or the supply is of a description for the time being so specified."

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Schedule 8 Group 6 (headed "Protected Buildings") so far as material provides:—

"Item No 2 The supply in the course of an approved alteration of a protected building of any services other than the services of an architect …

Notes:

(1) `Protected building' means a building which … is intended to be used solely for … a relevant...

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