The Lord Mayor and Citizens of the City of Westminster
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 August 1988 |
| Date | 09 August 1988 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Becker v. Finanzamt Münster-Innenstadt [1982] ECR 53
Clark's Cereal Products Ltd.; C. & E. Commrs.ELR[1969] 1 Q.B. 755
Fisher (Lord); C. & E. Commrs. v. VAT(1981) 1 BVC 392
Morrison's Academy Boarding Houses Association; C. & E. Commrs. v. VAT(1977) 1 BVC 108
Namecourt Ltd. VAT(1984) 2 BVC 208,028; (1984) VATTR 22
Rolls v. Miller ELR[1884] 27 Ch. D. 71
Yoga for Health Foundation v. C. & E. Commrs. VAT(1984) 2 BVC 200,044
Down and outs' refuge run by public authority constituted carrying on of a business - "Similar", to hotel, inn or boarding house considered - Exemption for public authority's transactions where no distortion of competition - Sixth Directive, Art. 4(5) had direct effect - Supply of accommodation to homeless closely linked to welfare work - Such supplies by bodies governed by public law, therefore exempt - Value Added Tax Act 1983 schedule 6 group 1VATA 1983, Sch. 6, Grp. 1, item 1 - Sixth Directive, Art. 4(5), 13A, para. 1(g).
The issue was whether supplies of goods and services made by the Council to men accommodated in Bruce House were taxable supplies.
The appellant, Westminster City Council ("the Council") managed Bruce House, built in 1906 in order to rehouse working class people displaced when Kingsway and Aldwych were built as part of the Holborn to the Strand improvement scheme. Bruce House was a lodging house built to accommodate about 600-700 men. Until the Public Health Act 1936, Bruce House was administered by the London County Council (L.C.C.) under the L.C.C. (General Powers) Act 1902, which enabled the L.C.C. to make bye-laws designed for the well ordering of the establishment. After the passing of the Public Health (London) Act 1936, it continued to be administered by the Council, and under section 6sec. 6 of the Housing Act 1936, more detailed bye-laws were made to the same general effect.
In 1948 the National Assistance Act became law, providing (section 21sec. 21) that it should be the duty of every local authority to provide accommodation for those in urgent need. After an experimental period of two years, the general management of Bruce House was transferred to the Social Welfare Department of the Council, and in 1965 the Council took over the running of Bruce House from the L.C.C., responsibility passing to the Director of Social Services. The House took homeless males off the street. Some came from charities which paid for the accommodation, but in the case of the great majority of applicants, the charge would be recovered from the D.H.S.S. Each man had a cubicle with wooden partitions, a bed and a chair, and a door which could not be locked. A locker for personal belongings might be hired for a small charge.
Conditions in the decaying building were poor, with too few washrooms, showers or toilet facilities. There were wooden chairs in a TV room, a number of hot plates for cooking and a stone staircase from floor to floor. The canteen, which served rudimentary breakfasts, dinners and teas, had been removed by the date of the hearing. There were crude laundry facilities, consisting of foot baths, for washing clothes, and vending machines for the purchase of cigarettes and soft drinks. Bed linen, which was often left soiled, was provided, and there was a staff of a principal, three assistants employed by the Social Services department, and 40 manual workers.
The task of the staff was "propping up" the men living there (who were often chronic alcoholics or grossly mentally disordered) and trying to find work for the men. The charge was £2.60 per night and £14.70 per week. Bruce House was not run as a profit-making institution. In 1986/87 expenditure exceeded income by £415,712, and it had consistently shown a loss.
The appellant presented a number of reasons why it should not be liable for VAT on the services to men in Bruce House:
1. In running Bruce House it was not carrying on a business for the purposes of VAT, and should therefore not be liable to tax under VATA 1983, Value Added Tax Act 1983 section 2sec. 2 on the goods and services supplied. The activities at Bruce House were welfare and social activities and did not amount to the carrying on of a business. They were not carried out with a view to profit or for a commercial purpose, control was exercised by the Council subject to public law, and these factors pointed away from the activities amounting to a business. Further, the supplies were made by the Council in pursuance of what it regarded as its welfare responsibilities towards the unfortunate occupiers.
2. Supplies made by the Council were exempt supplies because they were exempted from VAT by VATA 1983, Value Added Tax Act 1983 schedule 6 group 1Sch. 6, Grp. 1, item 1, being a grant to occupy land other than the provision of accommodation in an hotel, inn, boarding house or similar establishment.
The Commissioners did not dispute that the supplying of accommodation at Bruce House provided a licence to occupy land, but said that Bruce House was a similar establishment to an hotel, inn or boarding house, so was taken out of the exception by para. (a) of item 1.
3. Article 4(5) of the Sixth Directive was of direct effect and by that Article the Council, when making the supplies the subject of this appeal, was deemed not to be a taxable person and those supplies were therefore not chargeable to tax. Article 4(5) exempts from tax activities or transactions of (inter alia) local government authorities acting as such unless such exemption would significantly distort competition.
The Commissioners contended that there was here such a distortion of competition with other suppliers of the same goods and services and that Art. 4(5) had not been held to be of direct effect.
4. The supplies made by the Council at Bruce House were supplies made by a body governed by public law and were supplies of goods and services which were closely linked to welfare and social service work, and were therefore exempt by virtue of Art. 13A, para. 1(g) of the Sixth Directive.
The Commissioners contended that there was here such a distortion of competition with other and services provided at Bruce House were not welfare work because they were provided to all comers regardless of need.
Held, allowing the Council's appeal:
1. The goods and services supplied at Bruce House were supplies of a sort made commercially by others seeking to profit thereby, were carried out deliberately and continuously and the Council was primarily concerned with making these supplies, which were taxable supplies, for a consideration. In running Bruce House, albeit as part...
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