Richmond Park Maintenance Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 August 2014 |
| Neutral Citation | [2014] UKFTT 743 (TC) |
| Date | 01 August 2014 |
| Court | First-tier Tribunal (Tax Chamber) |
[2014] UKFTT 0743 (TC)
Judge Christopher Staker, Ms Helen Myerscough
Mr Simon Jessup, Mrs Margaret Jessup and Mr Michael Moore of the Appellant
Mr Philip Rowe, Presenting Officer, appeared for the Respondents
Value added tax - Service charges in respect of accommodation units at golf resort - Some units timeshare units, others subject to 99 year leases - Whether units are "holiday accommodation" (Value Added Tax Act 1994, "VATA 1994"), Value Added Tax Act 1994 schedule 9 group 1Sch. 9, Grp. 1) - In the circumstances of the case - Yes - Whether particular items in the service charges are disbursements - In the circumstances of the case - No - Appeal dismissed.
The First-tier Tribunal (FTT) dismissed the appeal against HMRC's decision that the annual service charge made by the Company to occupiers of accommodation units is standard rated.
HMRC decided that standard-rating applied to the annual service charge that the Appellant made to owners of accommodation units and to owners of timeshares of units because they were all "holiday accommodation".
The Appellant argued that:
(2) none of the units are "holiday accommodation" within Value Added Tax Act 1994 schedule 9 group 1Sch. 9, Grp. 1, so the maintenance charges were exempt;
(3) alternatively, even if the units are "holiday accommodation", various items in the service charges were disbursements and therefore are excluded in calculating VAT on the service charges. The items that were said to be disbursements are insurance, rates, water and sewerage, TV licence, trustee fees, golf privileges, the fee for management of the units (done by the Appellant's own staff) and cleaning (done by the Appellant's own staff).
The Appellant managed the site and collected service charges by issuing an annual invoice with VAT charged to:
(2) the Holiday Owner (in the case of timeshare units, also known as "timeshare lodges"), or
(3) the owner (in the case of long lease units, also known as "long-lease units").
The FTT held that the timeshare accommodation was "holiday accommodation" (para. 43 and 47 of the decision). The legal documents relating to the timeshare units refer to a timeshare owner as a "Holiday Owner". A "Holiday Certificate" was issued for each week of the year in relation to each timeshare unit. The use of the word "holiday" in that documentation was not just a matter of form. Clause 2.1 of the Regulations imposes a substantive obligation restricting the use of the timeshare units to that of private holiday home. Furthermore, the Appellant referred to the timeshare accommodation as "holiday accommodation", e.g. in a document dated October 2009, the Appellant states that "The accommodation units are not residential but are holiday accommodation in all respects" (para. 45 of the decision).
The FTT held that the "long-lease units" were "holiday accommodation". The lease describes the demised premises as a "holiday lodge". The definitions clause in the lease defines the "dwellings" to mean the "holiday lodges from time to time comprised in the Estate including the Demised Premises". Thus, the FTT held that the long lease units were at the very least held out as holiday accommodation or as suitable for holiday or leisure use (para. 49 of the decision). The sample lease requires the lessee to comply with the planning agreement "restricting the use of the Demised Premises to short term holiday accommodation and restricting the occupation of the Demised Premises by any person for a consecutive period of 28 consecutive days in one calendar year".
A payment qualifies as a disbursement if:
(2) the person acted as the client's agent when he paid the third party; and
(3) the client was responsible for paying the third party (Notice 700, para. 2.5.1).
The FTT was not persuaded that these requirements were met in relation to any of the payments, which the Appellant contended were disbursements (para. 58 of the decision).
This case had little chance of success.
[1]The Appellant company appeals against decisions of the Respondents ("HMRC") to refuse repayment of two claims for overpaid output tax, against an assessment for underpaid output tax, and against a decision of HMRC that the annual service charge made by the Appellant to occupiers of accommodation units is liable to VAT at the standard rate.
[2]All of these decisions stem from a finding by HMRC that the annual service charge that the Appellant issues to owners of units and to owners of timeshares of units is liable to VAT at the standard rate. This is because, according to HMRC, the units in question are all "holiday accommodation" within the meaning of Value Added Tax Act 1994 schedule 9 group 1Group 1 of Schedule 9 of the Value Added Tax Act 1994 ("VATA").
[3]The primary position of the Appellant is that none of the units are "holiday accommodation" within the meaning of Value Added Tax Act 1994 schedule 9 group 1Group 1 of Schedule 9 VATA, and that the maintenance charges are VAT exempt. HMRC accept that if the Tribunal finds that the units are not "holiday accommodation", the maintenance charges would be VAT exempt.
[4]The Appellant's alternative position is that even if the units are "holiday accommodation", various items in the maintenance charges are disbursements and therefore not to be taken into account in the calculation of VAT on the service charges. The items that are disbursements are said to include insurance, rates, water and sewerage, TV licence, trustee fees, golf privileges, the fee for management of the units (done by the Appellant's own staff), and cleaning (done by the Appellant's own staff). HMRC do not accept that any or all of these items are disbursements.
[5]There are a number of legal entities associated with the ownership, administration and management of accommodation units at the Richmond Park Golf Club. The Appellant company is one of these entities. Others are:
(2) The Richmond Park Golf Club Partnership (the "Partnership"). This is a partnership of members of the Jessup family, which holds the freehold to the Richmond Park Golf Club, including all units of accommodation at the site. It supplies lodges to third party owners by means of a long lease, typically of 99 years duration. It also enters into agreements with owners of timeshares whereby exclusive use of an apartment, on a timeshare basis, is vested in them by means of a "Holiday Certificate" issued by Hutchinson & Co Trust Company Limited ("Hutchinson") (see below). The Partnership also arranges for the management and administration of the apartments under rule 4 of the Rules of Occupation.
(3) Golf Apartments Richmond Park Title Limited (the "Title company"). The Partnership vests exclusive rights of occupation of the timeshare units to this company, acting as trustee, normally for a period of 80 years. This tenure is subject to the Rules of Occupation.
(4) Hutchinson: This company has control of the Title company together with a nominated custodian. In the case of the timeshare units, Hutchinson is required to issue a "Holiday Certificate" to the "Holiday Owner" under rule 2(c)(i) of the Rules of Occupation and clause 6.2(c) of the deed of trust, entitling the "Holiday Owner" to occupy exclusively the apartment indicated on the certificate for the weekly period allocated.
[6]The Appellant company is the management company appointed by the Partnership to manage the site and collect management charges as specified in rule 4 of the Rules of Occupation. The Appellant company issues an annual invoice for the service charges to either:-
(2) the Holiday Owner (in the case of timeshare units), or
(3) the owner (in the case of long lease units).
[7]In both cases, VAT has been charged on this invoice.
[8]Value Added Tax Act 1994 section 31 subsec-or-para 1Section 31(1) VATA provides that "A supply of goods or services is an exempt supply if it is of a description for the time being specified in Value Added Tax Act 1994 schedule 9Schedule 9" to that Act. Group 1 of Schedule 9 VATA relevantly specifies the following supply:
The grant of any interest in or right over land or of any licence to occupy land, or, in relation to land in Scotland, any personal right to call for or be granted any such interest or right, other than-
…
d the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering;
e the grant of any interest in, right over or licence to occupy holiday accommodation; …
[9]The notes to Group 1 of Schedule 9 VATA relevantly include the following:
-
(11)Paragraph (e) includes-
(a) any grant excluded from Value Added Tax Act 1994 schedule 8 group 5item 1 of Group 5 of Schedule 8 by note (13) in that Group; …
(13)"Holiday accommodation" includes any accommodation in a building, hut (including a beach hut or chalet), caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use, but excludes any accommodation within paragraph (d). …
[10]Section 30(2) VATA provides that "A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Value Added Tax Act 1994 schedule 8Schedule 8 or the supply is of a description for the time being so specified". Item 1 of Group 5 to Schedule 8 VATA provides:
The first grant by a person-
-
(a) constructing a building-
(i) designed as a dwelling or number of dwellings; or
(ii) intended for use solely for a relevant residential or a relevant charitable purpose; or
(b) converting a non-residential building or a non-residential part of a...
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