R (Greenwich Property Ltd) v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE COLLINS:,MR JUSTICE COLLINS |
| Judgment Date | 28 March 2001 |
| Neutral Citation | [2001] EWHC 230 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: 2950/2000 |
| Date | 28 March 2001 |
[2001] EWHC 230 (Admin)
IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT
QUEENS BENCH DIVISION
The Hon Mr Justice Collins
Case No: 2950/2000
The Queen on the Application of
Mrs Penny HAMILTON (instructed by Stephenson Harwood for theClaimant)
Mr Hugh McKAY (instructed by Solicitor for theCustoms and Excise)
On 23 September 1998, the Commissioners of Customs and Excise ('the Commissioners') decided to uphold an assessment that the Claimant was obliged to account for Value Added Tax (VAT) in a total sum of about £210,000. The assessment arose because the Commissioners decided that the claimant was not entitled to benefit from a concession which it believed meant that it was able to treat a supply as zero-rated. The delay in seeking judicial review of that assessment is because the claimant initially appealed to a Value Added Tax tribunal. But on 20 July 2000 the tribunal decided that there was no right of appeal since the claimant's case depended on an extra-statutory concession and it was "not within the jurisdiction of the tribunal, which is appellate in nature, to review the Commissioners' application of the [concession] any more than it is within our jurisdiction to review the Commissioners' 'care and management' powers, such as their conferring and withdrawing the benefits of extra-statutory concessions". On 15 August 2000 this application for judicial review was made. On 18 September 2000 Richards J granted permission to proceed notwithstanding the delay since he was satisfied that there was a good reason for it. Mr. McKay, who appeared before me on behalf of the Commissioners, indicated that he did not propose to take any point based on delay.
The claimant asserts that it had a legitimate expectation in accordance with the concession, whose terms it followed, that the relevant supply would be treated as zero-rated and it would therefore be unfair and so unlawful for the Commissioners to seek to claim the amount assessed. It relies in particular on R v Customs and Excise Commissioners ex parte Kay [1996] S.T.C 15000 and R v ITC ex parte MFK [1989] S.T.C. 873. In the alternative, it submits that the Commissioners' decision was irrational in that they misunderstood and so misapplied a decision of the VAT Tribunal in University of Bath v Commissioners of Customs and Excise (1996 No. 14235) and failed to appreciate that the arrangements made by the applicants did not fall outside the concession
The claimant company is a wholly owned subsidiary of the University of Greenwich. The University needed student accommodation. It decided to construct what is described as a student village at Avery Hill. This was to provide some 1300 bedrooms. The University itself paid for the development of about one half of the complex in Phase 1. This cost some £10 million and meant that the University had to pledge many of its teaching buildings in order to enable the essential development to go ahead. It therefore decided to fund Phase 2 in a different way by means of a Private Finance Initiative (PFI). PFI providers were invited to submit proposals for the supply of 650 bedrooms and ongoing facilities management for a period of 30 years at a price which would result in the University at least breaking even.
It is not necessary for the purposes of this case to rehearse the other requirements of the scheme in any detail. In due course, an arrangement was made with Wimpey Developments Limited through its subsidiary, of which it was guarantor, Avery Hill Developments Ltd (AHDL). The Principal Agreement, which was entered into on 25 October 1995, provided that the University should grant a lease of the relevant site at Avery Hill to the claimant. AHDL would construct the student residences for the claimant. The residences were to be maintained by AHDL for 30 years. The claimant would grant a lease of the newly constructed buildings to the University. It was recognised that the buildings would not be required for accommodation of students during the summer vacations and so AHDL were to be able to exploit them for other uses during those periods.
Before considering the relevant facts in more detail, I should set out the statutory framework and identify the concession relied on. VAT is normally chargeable on a supply of goods or services made by a taxable person, that is to say, a person whose annual turnover is sufficient to require him to be registered for VAT purposes. The taxable person can set off VAT he has paid on supplies to him in connection with his taxable supplies. The simple case is the wholesaler who purchases goods and then sells them on to a retailer. He can set the tax he pays on acquiring the goods against that which he has to charge the retailer and will pay the balance to the Commissioners. Naturally, there will be other items he purchases in connection with his business which he may also be able to set off in the same way. What he can set off is called input.
Some supplies are exempt. No tax is chargeable and no input may be claimed. Others are zero-rated. Again, no tax is chargeable, but the fiction is that the supplies are taxable but the tax is nil. This means that input can be claimed. There is thus a great advantage in being able to make a zero-rated as opposed to an exempt supply.
Supplies which are zero-rated are identified in Schedule 8 to the Value Added Tax Act 1994 as amended. Group 5 in Schedule 8 is headed 'Construction of Buildings etc.'. Item 1, so far as material, reads:-
"1. The first grant by a person -
(a) constructing a building -
(ii) intended for use solely for a relevant residential … purpose … of a major interest in, or in any part of, the building … or its site".
There follow notes which define and explain the terms set out in the items. Note (4), so far as material, reads:-
"(4). Use for a relevant residential purpose means use as —…
(d) residential accommodation for students…."
Note (12)(b) requires that, in order that the relevant supply shall qualify under Group 5, before the supply is made the "person to whom it is made has given to the person making it a certificate in such form as may be specified in a notice published by the Commissioners stating that the … supply … relates" to the building intended for the qualifying use. And Paragraph 1 of Schedule 10 to the Act provides that if the use of the building is changed to a non-qualifying use within 10 years, the zero-rating will be removed retrospectively. The provisions are a little more complicated and cover uses of parts of the building as well, but it is not necessary to go into more detail. Schedule 9 to the Act deals with exempt supplies. Item 1 of Group 1 covers the grant of any interest in or right over land. There are many qualifications but suffice it to say that, as will become clear when the scheme devised by the claimant is considered, the relevant supply would, if not zero-rated under group 5 of Schedule 8, have been exempt under Group 1 of Schedule 9. If so, the input claimed on the basis of zero-rating would have been wrongly claimed and so repayable to the Commissioners. Since the Commissioners decided that the supply was exempt rather than zero-rated, the assessment in question was made.
The difficulty arises because of the word 'solely' in Item 1 of Group 5. No university would want to be unable to turn its residential accommodation for its students to profitable use during the vacation. Greenwich was no exception. Thus it would be impossible to certify that the new building was intended for use solely for accommodation for students if the provisions of the Act applied with no modification.
The Commissioners, following discussions with the Committee of Vice-Chancellors and Principals of the Universities of the United Kingdom (CVCP), agreed to apply a concession which was contained in a document, known as 'the Concordat', issued by the CVCP, identifying concessions made by the Commissioners and setting out guidelines the purpose of which was to 'interpret the law concerning VAT within the higher education context'. The Concordat is dated 30 March 1990. It followed a letter from HM Customs and Excise to Mr. Anderson-Evans, who was the senior administrative officer of CVCP dealing with the matter, of 8 January 1990. Paragraph 6 of that letter reads:-
"That leaves the question of the issue of certificates. Higher education institutions are in a peculiar position as they know that some use is likely to be made of student accommodation for non-qualifying purposes during vacations but such use is difficult to quantify. In the circumstances, because in any event tax will be collected in respect of this non-qualifying vacation use and provided that the new building is clearly intended primarily for use as student accommodation for ten years from the date of its completion, then we are content for higher education institutions to disregard the 10% de minimis rule and to issue a certificate for the construction or acquisition of such a building as "relevant residential" building under Group 8 of the zero-rated schedule. Of course, where only part of a new building will qualify and part will not, the certificate and accompanying plans must clearly indicate which part or parts are entitled to relief and the 10% de minimis concession does not apply in this respect."
This concession was set out in Paragraph 37a of the Concordat, which itself is stated to contain detailed guidelines agreed with Customs and Excise. Mr. McKay did not contend that the Concordat should be...
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