Rhondda Cynon Taff County Borough Council
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 February 2000 |
| Date | 02 February 2000 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Ayuntamiento de Sevilla v Recaudadores de las Zonas Primera y Segunda VAT(Case C-202/90) [1993] BVC 186
C & E Commrs v Apple and Pear Development Council VAT(Case 102/86) (1988) 3 BVC 274
C & E Commrs v Lord Fisher VAT(1981) 1 BVC 392
EC Commission v The Netherlands (Case 235/85) [1987] ECR 1471
Glasgow City Council VATNo. 15,491; [1998] BVC 2239
Institute of Chartered Accountants in England and Wales v C & E Commrs VATVAT[1999] BVC 215(HL) [1996] BVC 228 (QB)
"Eurocontrol") (Case C-364/92) [1994] ECR I-43
Ufficio Distrettuale delle Imposte Dirette di Fiorenzuola d'Arda v Comune di Carpaneto Piacentino VAT(Joined Cases 231/87 and 129/88) [1991] BVC 70
Local authority - Input tax - Taxable person - Provision and maintenance of cemeteries - Whether appellant engaged in transactions as public authority - Whether treatment as taxable person would lead to "significant distortions of competition" - Burial fee charged for interment - Whether appellant carrying on any economic activity - Whether direct link between maintenance services and burial fees - Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 4art. 4 -Value Added Tax Act 1994Value Added Tax Act 1994, ss. 4 and 33.
The issue was whether, in carrying out its statutory obligations as a burial authority within its area, the appellant was engaged in transactions as a public authority and therefore not considered as a taxable person and, if it was not, whether it should be treated as such, on the basis that not to do so would lead to "significant distortions of competition". The tribunal also considered whether the appellant's activities amounted to an economic activity and whether there was a direct link between the burial fees and the maintenance services provided.
The appellant was a local authority formed in 1996 out of two former borough councils which had been set up in April 1974. Among the activities which it carried on were the provision and maintenance of the cemeteries and crematoria within the boundaries of its area. It had become a "burial authority" under the Local Government Act 1970, which charged it with a duty to cause to be buried or cremated the body of any person who had died or was found dead in its area. It also had a statutory obligation to maintain a register of, and store records relating to, all burials, with additional discretionary powers to provide chapels and mortuaries, grant burial rites, erect memorials and charge fees for interring bodies and maintaining graves. The fees amounted to £130 for a burial which gave no particular right to any exclusive plot and a further £130 for an exclusive right of burial for 100 years. In the year ending 1998, after receiving fees of £242,000 the appellant still achieved a deficit for that year of £896,000 after paying the cost of the upkeep of graves in cemeteries within its area and administering its chapels and offices. The tribunal heard evidence that, of the approximately 2800 cemeteries and crematoria in the UK, only about nine were private, of which the nearest to the appellant was in London. The appeal arose out of the fact that if the appellant made exempt supplies, amongst which are the arranging of the disposal of the remains of the dead, and the input tax attributable to such supplies constituted more than an insignificant proportion of the total, the appellant, as a local authority, would not be entitled to a refund of the tax. By letter dated 21 May 1999, the commissioners ruled that the provision and maintenance of cemeteries by the appellant was an exempt business activity.
The appellant contended that in providing and maintaining cemeteries it was not a taxable person, since in doing so it was acting as a public authority and therefore not considered to be a taxable person. It further argued that its treatment as a non-taxable person did not create a distortion of competition in relation to other similar activities within the private sector, maintaining that it was clear from the fact that its activities resulted in regular and continuing losses that it was not carrying on an economic activity and that, in any event, there was no direct link between the burial fees and the maintenance services provided, so that the input tax referable to the maintenance was not attributable to any exempt supply and was therefore recoverable underValue Added Tax Act 1994Value Added Tax Act 1994, s. 33.
The commissioners contended that although all local authority powers were conferred by statute, its activities in relation to burials and cremations were economic activities carried out under the same legal conditions as those that applied to private traders, so that it was not acting within the special legal regime applicable to its normal statutory duties. They further argued that to treat the appellant as a taxable person would lead to significant distortions of competition within the meaning of the second indent of eu-directive 77/388 article 4(5)art. 4(5) to Directive 77/388, the sixth VAT directive. There was a direct link between the input tax borne by the appellant and the fees which it charged for burying the dead. Thus the input tax was attributable to exempt supplies and was not recoverable under Value Added Tax Act 1994 section 33s. 33.
Held, allowing the taxpayer's appeal:
1. In providing and maintaining cemeteries, the appellant was acting under the special legal regime applicable to it and not under that which applied to private traders. It could thus be said to be engaged in those activities "as a public authority" within the meaning of eu-directive 77/388 article 4art. 4 and was therefore not a taxable person in respect of those activities.
2. Given that the nearest private cemetery, of which there were only nine in the UK, was in London and that the nearest crematorium was in Aberystwyth and given also that supplies of the disposal of the remains of the dead were exempt, there was no risk of a significant distortion of competition within the meaning of the second indent ofeu-directive 77/388 article 4(5)art. 4(5).
3. That was sufficient to determine the appeal in the appellant's favour. However, the tribunal went on to hold, obiter, that the provision and maintenance of cemeteries were an economic activity and that there was no direct link between the burial fees paid to the appellant and the maintenance services which it provided.
[The tribunal set out the facts summarised above and continued as follows.]
29. I consider separately each of the issues for determination in the appeal.
30. The first issue in the appeal is whether the appellant is a taxable person when providing and maintaining cemeteries having regard to the first indent of art. 4(5) [of Directive 77/388].
31. The first indent of eu-directive 77/388 article 4(5)art. 4(5) provides:
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4(5) States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions.
32. For the appellant, Mr Beglan argued that the appellant was not a taxable person when providing and maintaining cemeteries as the appellant acted as a public authority under a special legal regime and he cited Ufficio Distrettuale delle Imposte Dirette di Fiorenzuola d'Arda v Comune di Carpaneto Piacentino VAT(Joined Cases 231/87 and 129/88) [1991] BVC 70. Mr Beglan argued that the main legislation under which the appellant acted was [the Local Government Act1972] "the 1972 Act" and [the Local Authorities' Cemeteries Order 1977 (SI 1977/204)] "the 1977 Order". These gave local authorities power to provide and maintain cemeteries and crematoria and, if they did, then they had to comply with the provisions of the 1977 Order. The provisions of the 1977 Order did not apply to private cemeteries. Mr Beglan argued that it was not necessary that a public body had to have on obligation to provide services in order to be acting as a public body (although it was clear that if it was acting under an obligation then it was acting as a public body). However, he argued that the appellant did have obligations. Schedule 26 of the 1972 Act provided that a local authority created on 1 April 1974 had to exercise the functions of the burial boards which then ceased to exist. Accordingly, the appellant had an obligation to continue the provision and maintenance of the cemeteries they inherited on the changes in local government. Also, the appellant had a statutory obligation to maintain cemeteries under art. 4 of the 1977 Order and under s. 10 of theOpen Spaces Act 1906 and there was no equivalent statutory obligation for private or commercial cemeteries. However, even if the appellant did not have a statutory obligation to provide and maintain cemeteries it did have an indirect obligation to do so and did so under a specific legal regime. This could be contrasted with its power to run leisure centres which were not run...
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