Revenue and Customs Commissioners v Cook
| Jurisdiction | UK Non-devolved |
| Judgment Date | 28 January 2021 |
| Neutral Citation | [2021] UKUT 15 (TCC) |
| Year | 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2021] UKUT 15 (TCC)
Mr Justice Zacaroli, Judge Thomas Scott
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Exemption – Private tuition – Ceroc dance classes – VATA 1994, Sch. 9, Grp. 6, item 2 – Whether ceroc was a distinct form or style of dance – Yes – Whether it was ordinarily taught in a school or university – No – Whether purely recreational – No – Appeal allowed.
The Upper Tribunal (UT) set aside the earlier decision of the FTT in Cook [2019] TC 07149 and remade it, concluding that “Ceroc”, a form of dance, was not commonly taught in schools or universities and therefore its tuition could not be exempt under the private tuition exemption.
The appellant taught dance classes, specifically Ceroc classes, over 11 venues to the general public under a franchise agreement. Participants paid a nominal fee for life membership and a class fee for each session. The appellant was not registered for VAT. Their fees were, they argued, exempt from VAT under the exemption provided in VATA 1994, Sch. 9, Grp. 6, item 2 for the supply of private tuition in a subject ordinarily taught in a school or university.
The FTT had concluded the supplies by the appellant were private tuition in dance, which was a subject commonly taught in schools and therefore they were exempt from VAT.
HMRC contended the FTT had erred in law. They contended Ceroc was a distinct form or style of dance and there was no evidence it was commonly taught in schools or universities.
The FTT had concluded that teaching Ceroc was teaching generic dance rather than teaching a form or style of dance.
Re-examining all the findings of fact, the UT considered that decision was not one that was reasonably open to the FTT. It was not supported by the two primary reasons given for it, it failed to take into account certain findings of fact, failed to take into account other relevant evidence and placed reliance on certain factors the UT considered irrelevant.
The UT found that Ceroc was a form of pairs dancing and a fusion of jive and salsa. There was no evidence any of these was commonly taught in schools or universities. The supplies did not, therefore, fall within the private tuition exemption.
The UT considered whether the activities were purely recreational. The UT agreed with the FTT they were not purely recreational with the possible exception of freestyle or party evenings organised by the appellant which should have been distinguished, since it was accepted there was no tuition on these nights. There was not sufficient evidence to come to any decision in relation to these events. But it was not necessary to do so having found the activities fell outside the private tuition exemption on the basis they were not commonly taught in schools or universities.
Appeal allowed
Although it had no bearing on the conclusion in this case, the UT's conclusions on the definition of “purely recreational” and the correct interpretation of Haderer v Finanzamt Wilmersdorf (Case C-445/05). [2010] BVC 306 may be of interest to anyone considering this issue, particularly as it is the first decision of a UK court to consider this.
John Brinsmead-Stockham, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the appellants
Dario Garcia and Richard Harvey, instructed by Mishcon de Reya LLP, appeared for the respondent
[1] HMRC appeal, with the permission of the Upper Tribunal, against the decision of the First-tier Tribunal (the “FTT”) reported at [2019] TC 07149 (the “Decision”). The appeal concerns the FTT's decision that supplies of Ceroc dancing classes taught by Ms Cook were exempt from value added tax (“VAT”).
[2] In the period 1 October 2010 to 16 September 2012 Ms Cook personally made supplies of Ceroc dancing classes to the public. HMRC considered that those supplies were standard rated for VAT purposes. Ms Cook appealed against that decision, contending that the supplies were exempt on the basis that they were supplies of private tuition in a subject ordinarily taught in a school or university, namely the subject of dance.
[3] In the Decision, at paragraphs [5] to [14] the FTT summarised the relevant primary facts, and the parties in this appeal were agreed that this was an accurate summary. We therefore set it out in full, as follows:
[5] Ms Cook makes supplies of Ceroc dancing classes to the general public under the terms of a franchise agreement with Ceroc Enterprises Limited (“the franchisor”).
[6] Ms Cook has carried on a business of supplying Ceroc dancing classes to the general public in the following ways:
- Ms Cook traded as Ceroc Fusion Limited (CFL) between 25 September 2006 and 30 September 2010,
- Ms Cook then operated as a sole trader, trading as Ceroc Fusion, between 1 October 2010 and 16 September 2012 (ie the relevant period), and
- Ms Cook incorporated and began to trade as Ceroc Fusion (East Anglia) Limited (CFEA) on 17 September 2012.
[7] Ms Cook did not register for VAT in the relevant period, and did not account to HMRC for any VAT in respect of that period.
[8] The teaching of Ceroc uses a form of pairs dancing that incorporates moves from many other styles of dance (eg Ballroom, Salsa, Jive, Hip Hop and Tango), and involves a particular methodology for learning those moves. Ceroc teachers are only allowed to teach moves which are set out on the Ceroc intranet, which illustrates approximately 900 different moves.
[9] All Ceroc dancing classes follow a set format that involves:
- A five minute warm-up session.
- A Beginners' Class for 45 minutes where participants learn three or four basic moves out of a fixed set of 12.
- A 15 minute Beginners practice session.
- An Intermediate Class for 30 minutes (subject to demand) where participants learn four or five more advanced moves. The Intermediate syllabus is twelve classic moves and a number of advanced moves to make a total of 36 at the relevant time. The total has varied slightly from time to time.
- During this time Beginners dance separately with experienced volunteers known as taxi-dancers.
- A Freestyle session for 90 minutes where all participants dance to music played by a disc-jockey (DJ). During this time the instructor will observe the class and effectively give one-to-one tuition as required.
[10] Customers may attend for all or only part of the class and do not need to attend every class on a sequential basis but Beginners are only allowed to progress to the Intermediate Class when they have attended six Beginners Classes, by which time they should have learnt all of the 12 basic moves which are taught to Beginners.
[11] When they progress to the Intermediate level, students are taught a much wider range of moves, including 24 Classic Moves and a large number of more advanced moves. After attending six Beginner Classes and two “courses” of Intermediate Classes of 12 sessions each, most students will have learnt approximately 84 moves.
[12] During the relevant period when Ms Cook was carrying on the business of supplying Ceroc dancing classes as a sole trader:
- Ms Cook supplied the classes at 11 venues throughout Norfolk.
- There was no set course of classes for customers to enrol into, instead customers were able to turn up to classes whenever, and wherever, they wished to.
- In order to supply the classes Ms Cook hired other self-employed individuals (staff hire) including a DJ for each class, someone to work on the door, and in some cases an instructor to teach the class.
- In order to participate in a Ceroc dancing class, customers were required to purchase Ceroc life membership for a small nominal fee (between £1–£3), and then to pay a fixed fee (between £5–£8) for each class (the class fee). In practice Ms Cook included the membership fee in the fee for the first class.
- Ms Cook received all of the class fees and was required to pay a percentage of her takings (usually between 9–13%) to the franchisor.
- The class fee was charged in respect of the evening as a whole (ie including all of the elements set out above).
- Ms Cook paid all of the expenses of the business (e.g. venue hire, staff hire).
[13] Ms Cook also organised what were termed Freestyle or Party Evenings approximately once a month in each area in which she taught. We were not provided with any substantial evidence as to what happened at these events. There was no formal tuition at these events but HMRC did not seek to separate out the treatment of these supplies from that of the normal evening classes and neither will we.
[14] Although, as set out above, Ms Cook engaged instructors to teach some of the Ceroc dancing classes that she supplied, these appeals are concerned only with the classes that were personally taught by Ms Cook.
[4] The relevant legislation is contained in Principal VAT Directive 2006/112/EC (“PVD”) and the Value Added Tax Act 1994 (“VATA”).
[5] PVD article 132(1)(j) provides that:
(1) Member States shall exempt the following transactions:
- (j) tuition given privately by teachers and covering school or university education.
[6] his exemption is given effect in UK law by section 31 and Schedule 9 Group 6 Item 2 VATA , which state:
(1) A supply of … services is an exempt supply if it is of a description for the time being specified in Schedule 9 …
Item 2
The supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer.
[7] The parties agreed, correctly in our view, that article 132(1)(j) and the UK provisions were identical in their effect, with “ordinarily” in the UK legislation to be read as meaning “commonly”. It was also agreed that Ms Cook is entitled to rely on the direct effect in UK law of article 132(1)(j).
[8] The words “school or university education” in the PVD were interpreted by the Court of...
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