The Commissioners for HM Revenue and Customs v Chelmsford City Council [2022] UKUT 00149 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Upper Tribunal Judge Swami Raghavan,Mrs Justice Joanna Smith |
| Neutral Citation | [2022] UKUT 00149 (TCC) |
| Subject Matter | 15 June 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 16 June 2022 |
[2022] UKUT 00149 (TCC)
Appeal number:
UT/2021/000024
UT/2021/000076
VAT–– local authority providing sports and leisure facilities – whether
engaging as public authority - Article 13 PVD – appeal dismissed – not
necessary to consider cross-appeal on Note 3 Group 10 Sch 9 VATA 1994, but
if it were, cross-appeal would be dismissed
UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Appellant
Respondents
in cross-
appeal
-and-
CHELMSFORD CITY COUNCIL
Respondent
Appellant in
cross-appeal
Sitting in public in London, on 9 and 10 March 2022
Raymond Hill, counsel, instructed by the General Counsel and Solicitor to HM Revenue
& Customs, for the Appellants /Respondents in cross-appeal
Amanda Brown QC and Adam Rycroft, KPMG LLP, for the Respondent /Appellant in
cross-appeal
© CROWN COPYRIGHT 2022
TRIBUNAL:
MRS JUSTICE JOANNA SMITH
JUDGE SWAMI RAGHAVAN
2
DECISION
Introduction
1. The appellants each appeal against the decision of the First-tier Tribunal (“FTT”)
published as Chelmsford City Council v Commissioners for HM Revenue & Customs
[2020] UKFTT 432 (TC) (“the Decision”).
2. The central issue in the appeal is the VAT liability for admissions charges for sports
and leisure facilities (the “Facilities”) provided by the local authority, Chelmsford City
Council (“Chelmsford”). In particular, whether, as HMRC contends, Chelmsford was
acting as a taxable person when providing the Facilities (and so was subject to VAT)
or whether, as Chelmsford argues, it was acting as a public authority pursuant to Article
13(1) of the Principal VAT Directive 2006/112/EC (the “PVD”). Under the relevant
case-law on Article 13 of the PVD, that question turns on whether the body providing
the facilities was acting pursuant to a “special legal regime” applicable only to the
public authority and not to private operators. The FTT agreed with Chelmsford, that its
services were provided under a special legal regime and that, accordingly, the supplies
did not bear VAT. HMRC appeal against the Decision on that issue (“the Special Legal
Regime Issue”) with the permission of the FTT.
3. If the FTT was wrong on the Special Legal Regime Issue, a further issue arises
regarding the interpretation of a domestic VAT provision (Note 3, Group 10, Schedule
9 of the Value Added Tax Act 1994 (the “VAT Act”)) (“the Note 3 Issue”). That turns
on whether (as Chelmsford contends) the terms of Note 3 operated as an exercise of the
discretion permitted under Article 13(2) of the PVD so as to treat the relevant supplies
made by Chelmsford as carried out by it as a public authority. The FTT rejected
Chelmsford’s interpretation of Note 3. With the FTT’s permission, Chelmsford cross-
appeals against the Decision on the Note 3 Issue.
Procedural Background
4. By a voluntary disclosure submitted in December 2010, Chelmsford claimed
repayment of VAT allegedly overpaid in VAT accounting periods between 2006 and
2010, totalling around £0.9 million. The claim was rejected by HMRC and Chelmsford
appealed to the FTT. In circumstances where similar issues had arisen across the UK,
3
this case was designated a “lead case” for England and Wales. Lead cases were also
designated for Scotland and for Northern Ireland. The same three judge FTT panel was
convened to hear all of these lead cases. The lead cases for Scotland (Midlothian
District Council v Revenue & Customs [2020] UKFTT 433 (TC)) and Northern Ireland
(Mid-Ulster District Council (formerly Magherafelt District Council v Revenue &
Customs [2020] UKFTT 433 (TC)) considered the legislation relevant to those
jurisdictions. The FTT found in the relevant local authority’s favour on the Article 13
Special Legal Regime Issue in both. HMRC have not appealed Midlothian. They have
appealed Mid-Ulster but on different grounds not relevant to this appeal.
5. Before the FTT, Chelmsford’s first argument was that the supply of the Facilities
to members of the public was not an “economic activity” such that Chelmsford was not
a “taxable person” within the meaning of Articles 2 and 9 of the PVD and hence not
subject to VAT. The FTT found against Chelmsford on this point but granted
permission to appeal. Chelmsford withdrew this aspect of its appeal shortly before the
hearing before us. HMRC’s appeal on the Special Legal Regime Issue, and
Chelmsford’s cross-appeal on the Note 3 Issue, are discrete issues and were argued
sequentially before us. In dealing with those two issues in the same manner, we first
address the Special Legal Regime Issue. We will set out the background law and
summary of the parts of the Decision relevant to that issue before moving on to a more
detailed discussion of the legal principles to be applied and whether the FTT applied
those correctly.
Background law on Special Legal Regime Issue
6. Despite Chelmsford’s withdrawal on the issue of “economic activity”, Articles 2
and 9 of the PVD remain relevant in that they provide the general rule against which
the derogations and exemptions at issue in this case apply. Article 2 subjects the supply
of services for consideration by a “taxable person” acting as such to VAT. Article 9
defines “taxable person” as meaning any person who “carries out…any economic
activity”. Any activity of an economic nature may thus be subject to VAT.
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