McGrath
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 December 1989 |
| Date | 04 December 1989 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Namecourt Ltd VAT(1984) 2 BVC 208,028; (1984) VATTR 22
The Lord Mayor and Citizens of the City of Westminster VAT(1988) 3 BVC 847; (LON/87/564) No. 3367
Exempt supply - Residential accommodation - Hotels, inns, boarding houses or similar establishments - Whether two categories or residents in a guest house, short stay or long term, should be assessed differently for VAT - Whether casual guests should pay charges attracting VAT at standard rate and long term residents should be exempt -Value Added Tax Act 1983, Value Added Tax Act 1983 schedule 6group 1Sch. 6, Grp. 1, item 1, exception (c).
The issue was whether residential accommodation supplied to long-stay guests by the appellant was an exempt supply for tax purposes.
The appeal concerned the business conducted by the appellant under the name of Norman's Guest House ("Norman's"). The business had two aspects, the provision of bed and breakfast for casual guests and of facilities for long-term residents. It was accepted that casual guests paid charges attracting VAT at the standard rate. The appeal concerned the long-term residents, the appellant having been assessed on the basis that the latter also attracted VAT at the standard rate. The appellant contended that long-term residents' charges were not subject to VAT as the accommodation they occupied was their home and so outside the charging provisions for VAT.
The long-term residents were mostly single men who regarded Norman's as their permanent home. These long-term guests accounted for 80 per cent of the total accommodation. The establishment provided two separate dining rooms and two separate lounges. Casual guests were only served with breakfast, whereas permanent residents were provided with an evening meal, but were allowed no cooking facilities in their own rooms and were denied access to the kitchen at all times. Casual visitors stayed for one day to two weeks. Permanent residents remained for a number of years and were permitted to decorate their rooms with pictures and to have some of their own possessions, although the appellant provided, laundered and replaced the bedding. All guests could be required to vacate a room and occupy another: guests normally reverted to the occupancy of thier former room, but had no right to it.
On 12 January 1989 the appellant received a notice from the Manchester City Council giving revised directions to prevent or reduce overcrowding in a house in multiple occupation. The authority did not regard Norman's as a hotel or boarding house as the standards imposed for multiple occupation were stricter than would apply to a hotel or boarding house. The premises were visited by an officer from the local VAT office to check entries in the books to indicate which items related to casual or to permanent guests. This was required because charges made to long-term residents were subject to special valuation provisions for VAT purposes.
The commissioners' case was that Norman's was operating as a hotel, boarding house or similar establishment and as such the exemption provided by the Value Added Tax Act 1983, schedule 6 group 1Sch. 6, Grp. 1, item 1 could not apply so the appeal must fail.
The appellant contended that leaflet No. 709 produced by HM Customs and Excise defining hotels or similar establishments did not apply, as the residents of Norman's regarded it as their home.
Held, dismissing the taxpayer's appeal:
1. Norman's was exactly what its title indicated, viz. a guest house, and was an establishment similar to a hotel or boarding house, with no distinguishing features.
2. It was irrelevant that guests considered Norman's to be their home, as their permanency could not affect the function and description of the establishment. Hotels often had long-term residents.
3. Manchester City Council's regulations governing premises which they described as houses in multiple occupation did not preclude Norman's from being a hotel, boarding house or similar establishment.
4. Accordingly the provision of accommodation and other services to long-term residents was taxable at the standard rate.
[The tribunal set out the facts summarised above and continued as follows.]
Mrs Clarke [for the commissioners] referred me to the relevant statutory provisions … item 1 of Sch. 6 to that Act. This is part of the schedule headed "Group 1 - Land". This item commences:
The grant of any interest in or right over land or of any licence to occupy land, other than -
We need only concern ourselves with subclause (c) which reads:
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(a) the provision in a hotel, inn, boarding house or similar establishment of leeping accommodation or of accommodation in rooms which are provided in conjunction therewith or for the purpose of a supply of catering; …
The other exceptions are not relevant to this appeal.
Exception (c) which is quoted was amended to the quoted words with effect from 1 November 1986. Prior to 1 November 1986 the exception was subclause (a)...
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