Revenue and Customs Commissioners v Finnamore (t/a Hanbidge Storage Services)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 July 2014 |
| Neutral Citation | [2014] UKUT 336 (TCC) |
| Date | 17 July 2014 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2014] UKUT 0336 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Warren, Chamber President
Michael Jones, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs appeared for the Appellants
The Respondent appeared in person
Value added tax - Classification of supply of plot of land and storage facilities in moveable containers - Directive 2006/112 (the Principal VAT Directive), eu-directive 2006/112 subsec-or-para 1 article 135art. 135(1)(j) and (l) - Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 9 group 1Sch. 9, Grp. 1, item 1 - Whether supply exempt - No - HMRC appeal allowed.
The Upper Tribunal (UT) allowed HMRC's appeal against the decision of the First-tier Tribunal (FTT) ([2011] TC 01081), so the self-storage supplies were standard-rated, not exempt.
Mr Finnamore provided self-storage facilities by allowing customers to use metal storage containers located on open land, which he owned. He had 184 containers, which were arranged to allow vehicular access to each, so goods could be loaded or removed easily. The site was surrounded by a fence and was accessed through one pair of security gates, which were locked at night. He advertised the service and facilities as a self-storage facility. There was a minimum period of storage of two weeks, with many units being rented on a much longer basis. The containers were let under a standard rental agreement (the Licence Agreement), which gave the customer a right to use a specified storage container and the land on which it was located. The Licence Agreement did not require Mr Finnamore to provide security.
Mr Finnamore argued that the agreement was exempt under eu-directive 2006/112 subsec-or-para 1 article 135art. 135(1)(j) and (l), which was reflected in Value Added Tax Act 1994 schedule 9 group 1Sch. 9. Grp. 1, item 1.
The FTT allowed Mr Finnamore's appeal, holding that his storage business supplied a single service, the predominant element of which was the provision of a "licence to occupy" a defined parcel of land. Accordingly, the supplies were held to be exempt under Value Added Tax Act 1994 schedule 9 group 1Grp. 1, item 1.
The UT held that the storage units, the containers, are movable property as a matter of EU law (Maierhofer v Finanzamt Augsburg-LandECAS (Case C-315/00) [2003] BVC 325) (para. 12 of the decision).
The supply comprised more than one element of service to each customer, since there was a licence to occupy the plot on which the storage unit sat and the use of the storage container. The UT held that for VAT purposes there was a single composite supply (para. 17 of the decision).
The UT considered whether that single composite supply is exempt either as the grant of a "licence to occupy land" or as the "leasing or letting of immovable property". The characterisation of a supply is a matter of law, not fact. Although an appellate court may correct an error of law made by the FTT, it is "customary for an appellate court to show some circumspection before interfering with the decision of the [FTT] merely because it would have put the case on the other side of the line" (para. 20 of the decision).
The UT held that it cannot sensibly be contended that one element of the supply is predominant and the other or others are ancillary, although this is not to say that one element may not be more important than another (para. 25 of the decision).
The UT held that it is not easy to see how a typical customer would be able to use the plot for any purpose (such as open-air storage) other than as the site for the container (para. 25 of the decision).
The typical customer's purpose was not to be granted an interest in land or a right to use immovable property, but was to be provided with a secure storage unit, which he can access and store goods. The customer was not concerned with where on Mr Finnamore's land his goods or the storage container were kept. His concern was only that the goods were stored and kept safely. The licence to occupy the plot on which the container stands may be necessary in order for the customer to achieve his purpose, but the grant of such a licence was not the reason he made the agreement with Mr Finnamore.
This case highlights the problems in deciding what was supplied for VAT purposes. The result is bad news for other suppliers of self-storage facilities in similar circumstances.
[1]This is an appeal by the Appellants ("HMRC") against a decision of Judge Geraint Jones QC and Mr Andrew Perrin ("the Tribunal") released on 2 February 2011 ("the Decision"). The Tribunal allowed the appeal of the Respondent taxpayer ("Mr Finnamore") holding that his storage business involved the making of supplies of a single service, the predominant element of which was the provision of a licence to occupy a defined parcel of land. Accordingly, the supplies were held to be exempt from VAT under Value Added Tax Act 1994 schedule 9 group 1item 1 of Group 1, Schedule 9 Value Added Tax Act 1994.
[2]Mr Michael Jones appears for HMRC; Mr Finnamore appears in person. I shall refer to the Court of Justice, one constituent part of the Court of Justice of the European Union, as "the Court".
[3]The facts, taken from the Decision, are accurately summarised by Mr Jones in his skeleton argument as follows:
-
(a) Mr Finnamore trades as Hanbidge Storage Services from a site at Hanbidge Marina, Littlehampton, West Sussex. He provides self storage facilities by providing containers which are located upon open land which he owns.
-
(b) The containers used are large and of metal construction . At one end there are metal doors that can be opened but, when closed, can be secured with a semi-concealed padlock. The containers ensure that any stored goods are protected from the elements. The containers are of the type regularly seen on lorries and being transported on ships in bulk. By their nature they are movable although specialist lifting gear is required to move them from place to place or onto a lorry or ship. Mr Finnamore has approximately 184 containers located on his land. They are arranged in such a way as to allow vehicular access to each container so that goods may be loaded into or taken from any container with comparative ease. The units can be moved but they "usually" rest on the ground under their own weight. The word "usually" was used by the Tribunal but there was no evidence that they were ever attached to the ground.
-
(c) Mr Finnamore's customers can either store their goods in a container on Mr Finnamore's site or can choose to rent a container only and take it away from Mr Finnamore's premises to use it at another location. The weekly cost of the former, as at 1 October 2010, was £28.58 per unit, and the weekly cost of the latter was around a quarter of that sum.
-
(d) The entire site is surrounded by a fence and there is also a security team present. Access to the site is through a single pair of matching security gates which are locked at night. People who store goods at the facility can have unrestricted access during normal working hours but outside such hours, they can secure access by arrangement with the on-site security team.
-
(e) Mr Finnamore advertises the service and facilities offered at his site as a self storage facility, and he does so in the local press, telephone directories and on a web site. Such advertisements appear in the "storage" section of such advertising material.
-
(f) There is a minimum period of storage, being two weeks, with many units being rented on a much longer term basis.
-
(g) Mr Finnamore's customers enter into a standard form rental agreement described as a "Licence Agreement". The name of the customer is inserted prior to a particular unit being identified by its number and its size. The start date for the hire is specified and the storage charge rate is also inserted. The agreement contains standard form "Terms and Conditions", including:
-
(i) Clause 2, which provides that provided that the fees are paid, the customer is licensed to use the identified unit for the storage of goods in accordance with the agreement. It further provides that the customer may have access to the unit at any time during access hours (which are defined) only for the purpose of depositing, removing, substituting or inspecting the goods. "Unit" is defined in clause 1 as
-
the storage unit specified overleaf or any alternative storage unit we may specify under condition 11.
(ii) Clause 11 of the Agreement which reads as follows:
During the course of this agreement with us you will have use of (a) the numbered storage container occupying the area of land coloured in red on the attached plan and (b) the land coloured red on the attached plan.
[4]There are two comments to make on these facts. The first is that, as can be seen, the Licence Agreement refers in the definition of "Unit" to any alternative unit specified under condition 11 but condition 11 itself does not in fact contain any such provision. This may simply be because the Licence Agreement is a standard form which has been slightly amended with no proper account being taken of the knock-on effects of the amendments. Nothing turns on this for present purposes. The second comment is that the Licence Agreement does not require Mr Finnamore to provide a security team. The storage facility is next to a larger family enterprise, the Littlehampton Marina Ltd. A security team is employed by that company. As a matter of practice, the personnel employed do patrol the storage area and are available to provide access during the hours when the gates are locked.
[5]The relevant domestic legislation is...
To continue reading
Request your trial
-
International Antiques and Collectors Fairs Ltd
...of that single supply. The approach to be adopted was stated by Warren J in R & C Commrs v Finnamore (t/a Hanbidge Storage Services) VAT[2014] BVC 530: The central issue[18] The issue is therefore the correct classification of that single composite supply. The question is whether it is exem......
-
British Credit Trust Ltd
...recently helpfully summarised by Warren J in the Upper Tribunal decision in R & C Commrs v Finnamore (t/a Hanbidge Storage Services)VAT[2014] BVC 530 at [24] in relation to the correct categorisation of a supply, a question which was informed by the question whether there was a composite or......
-
Serpentine Trust Ltd
...would constitute a separate supply …" [95]Warren J also commented in R & C Commrs v Finnamore (t/a Hanbidge Storage Services)VAT[2014] BVC 530 at [24] that the question of whether there is a single composite supply is closely related to the question of the nature of that supply. This sugges......
-
The Commissioners for HM Revenue and Customs v David Finnamore (t/a Hanbidge Storage Services)
...[2014] UKUT 0336 (TCC) VAT – Classification of supply of plot of land and storage container - Item 1 Group 1 Schedule 9 Value Added Tax Act – supply exempt – no – appeal allowed IN THE UPPER TRIBUNAL TAX AND CHANCERY CHAMBER FTC/47/2011 BETWEEN THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AN......