Revenue and Customs Commissioners v UK Storage Company (SW) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 October 2012 |
| Neutral Citation | [2012] UKUT 359 (TCC) |
| Date | 17 October 2012 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2012] UKUT 359 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Judge Greg Sinfield, Judge Edward Sadler.
Michael Jones (instructed by the Solicitor to HM Revenue and Customs) for the appellants.
Michael Conlon QC (instructed by Freshfields Bruckhaus Deringer LLP) 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
Byrom (t/a Salon 24) v R & C CommrsVAT [2006] BVC 279
Card Protection Plan Ltd v C & E CommrsECASVAT (Case C-349/96) [1999] BVC 155; [1999] ECR I-973
C & E Commrs v Sinclair Collis LtdVAT [2001] BVC 378
Dr Beynon & Partners v C & E CommrsVAT [2005] BVC 3
Don Bosco Onroerend Goed BV v Staatssecretaris van FinanciënECASVAT (Case C-461/08) [2010] BVC 1,084; [2009] ECR I-11079
Edwards v BairstowELRTAX [1956] AC 14; (1955) 36 TC 207
Expert Witness Institute v C & E CommrsUNKVAT [2001] EWCA Civ 1882; [2002] BVC 220
Field Fisher Waterhouse LLP v R & C CommrsECASVAT (Case C-392/11) [2012] BVC 292
Finnamore (t/a Hanbridge Storage Services)TAX [2011] UKFTT 216 (TC); [2011] TC 01081
Levob Verzekeringen BV v Staatssecretaris van FinanciënECASVAT (Case C-41/04) [2007] BVC 155; [2005] ECR I-9433
MacDonald Resorts Ltd v R & C CommrsECASVAT (Case C-270/09) [2011] BVC 171; [2010] ECR I-13179
Maierhofer v Finanzamt Augsburg-LandECASVAT (Case C-315/00) [2003] BVC 325; [2003] ECR I-563
Marleasing SA v La Comercial Internacional de Alimentacion SAECAS (Case C-106/89) [1990] ECR I-4135
R & C Commrs v Insurancewide.Com Services LtdUNKVAT [2010] EWCA Civ 422; [2010] BVC 606
Sinclair Collis Ltd v C & E CommrsECASVAT (Case C-275/01) [2003] BVC 374; [2003] ECR I-5965
Value added tax - Self-storage - Whether storage units immovable property - Whether right to store goods in units exempt grant of licence to occupy land - Whether single supply standard-rated provision of storage services - HMRC's appeal allowed - Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 9 group 1Sch. 9, Grp 1, item 1.
This was an appeal by HM Revenue and Customs against a decision of the First-tier Tribunal ([2011] UKFTT 549 (TC); [2011] TC 01394) that the taxpayer's supplies of storage constituted the leasing or letting of immovable property and were accordingly exempt from VAT.
The taxpayer was the freehold owner of storage facilities in Somerset. The premises consisted of a concrete surfaced compound surrounded by a secure perimeter fence. Within the compound were approximately 300 individual single-storey storage units, each self-contained and fully enclosed with a base, sides and a roof. The units were made from steel sheeting and weighed 600kg. They were assembled on site and positioned side-by-side in gap-free rows using a tractor-like vehicle with a forklift attachment. The units rested on the ground under their own weight and were not fixed to the land. It was feasible that the units could be moved either in whole or in parts to another site when empty, but no units at the premises had been moved or removed once put into place. The units could be dismantled. It would take two man-days to do so. The taxpayer made the self-storage units available to customers for a fee. The customers entered into a standard form of licence agreement for an indefinite period terminable by either party on one weeks' notice. The licence agreement allowed the customer to occupy the designated unit for the purpose of storing goods, but expressly did not confer any right to exclusive possession.
HMRC took the view that the provision of storage facilities was standard-rated for VAT purposes. The taxpayer contended that the storage units were effectively buildings forming part of the land on which they were installed. Accordingly, they fell within the meaning of "land" within the Value Added Tax Act 1994, Sch. 9, Grp. 1, item 1 and were "immovable property" within the meaning of art. 135(1)(l) of Council Directive 2006/112. The customer was granted a licence to store his goods in a specifically identified and numbered storage unit and enjoyed exclusive occupation of the unit to which only he had access. Therefore, the agreement conferred "an interest in or a right over land" within the meaning of item 1 of Grp. 1 and/or the grant of a "lease or letting" within the meaning of art. 135(1)(l). Further, the storage unit was a "building" within the meaning of art. 135(1)(j) read in conjunction with art. 12(2). HMRC argued the units in dispute were not immovable property because they were not fixed to the land, but rather sat on the land and could easily be moved. The agreement fell short of a licence to occupy land for the purpose of Sch. 9 because it did not guarantee the customer exclusivity of possession. Moreover, art. 135(1)(j) did not assist the taxpayer and was of no relevance. If the taxpayer was engaged in the letting of immovable property then that letting formed only part of a composite supply comprising use of a storage unit and use of land, but it was the former that was the predominant supply. It followed that the supplies were not exempt pursuant to item 1.
The FTT allowed the taxpayer's appeal against HMRC's decision that the supplies were not exempt, holding the supplies constituted the leasing or letting of immovable property. HMRC appealed contending that the FTT had erred in law in three respects, namely in concluding that: (1) the storage units were immovable property; (2) the agreements between the taxpayer and its customers in relation to the storage units were licences to occupy which conferred an exclusive right to occupy the units; and (3) the principal or predominant element of the taxpayer's supply was a licence to occupy a specific storage unit or area of land.
Held, allowing the appeal:
1.In order to be immovable property for the purposes of the exemption, a building or structure had to be fixed to or in the ground in such a way that it could not be either easily dismantled or easily moved. The fact that the building or structure was not inseverably fixed to or in the ground and that it would or might be removed at some point in the future did not prevent it from being immovable property. Further, whether the building would or could be reused on another site was not relevant in determining its status as movable or immovable property. In the present case, in order for the storage units to be classified as immovable property, they had to be fixed to or in the ground and not easily dismantled and removed or easily moved without being dismantled. The FTT concluded that the units, although not bolted to the ground, were for all practical purposes fixed to the ground. However, that was not the test. The first question was simply whether the structure was fixed to or in the ground. The only answer to that question was that they were not and it followed that the storage units were not immovable property. Even if the units had been found to have been fixed to or in the ground, they would not be immovable property as they could be easily dismantled. The FTT had not applied the correct test when considering whether the units could be easily dismantled. It seemed to have added a further condition to the question, namely whether the dismantled units could be re-erected elsewhere in a way that would guarantee their structural integrity. Whether a building was capable of being reassembled intact elsewhere was irrelevant in considering whether it could be easily dismantled. On the facts as found by the FTT, the only conclusion that it could have reached was that the units could be easily dismantled and removed and, therefore, were not immovable property. (Maierhofer v Finanzamt Augsburg-Land (Case C-315/00) [2003] BVC 325; [2003] ECR I-563 applied.)
2.The FTT correctly found that all the requirements for a letting of property were present and the right of the taxpayer to enter the unit in certain circumstances did not mean that the agreement did not create a right to occupy the unit. A tenant's rights could be restricted, especially as regards the competing rights of the landlord, without the supply losing its character as a right to occupy. There was a point when the rights were so restricted that they did not amount to occupation in any meaningful sense but that point had not been reached in the present case. The customers could act as if they were the owner of the unit by storing permitted goods there and by locking the premises with the padlock they had bought. The fact that the taxpayer retained control over access in some cases, rights of entry and inspection as well as the ability to require a customer to move to another unit did not undermine the FTT's conclusion that the agreement between the taxpayer and the customer created a licence to occupy. If the storage units were immovable property, then the taxpayer would have granted the customers licences to occupy them. (Belgium v Temco Europe SA (Case C-284/03) [2007] BVC 308; [2004] ECR I-11237 considered.)
3.Since the subject matter of the agreement between the taxpayer and its customers was not immovable property, it followed that the exemption could not apply and the composite supply, however it was characterised, was standard-rated. If the storage units were immovable property, and the taxpayer granted licences to occupy the area of ground on which the units were placed, taking all the circumstances into consideration, the single supply should nevertheless be characterised as the provision of storage services and therefore standard-rated for VAT purposes. For a typical customer the ability to occupy a particular unit or area of land was not an end in itself but a means of better enjoying the storage services provided. The evidence was that a customer would usually specify what size of unit was required to store his or her goods but there was no evidence that any customer specified...
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