Virgin Atlantic Airways Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 January 1996 |
| Date | 12 January 1996 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
British Airways plc v C & E Commrs VAT(1990) 5 BVC 97
British Railways Board v C & E Commrs VAT(1977) 1 BVC 116
Card Protection Plan Ltd v C & E Commrs VAT[1994] BVC 20
Peninsular & Oriental Steam Navigation Co VAT(LON/94/1146) No. 13,478; [1996] BVC 2435
Rayner & Keeler Ltd VAT(LON/90/306) No. 5803; [1991] BVC 1346
River Barge Holidays Ltd (LON/77/345) No 572
Supply - Characterisation of supply - Whether composite or multiple - Hire of boat for river trips with catering included - Whether single standard-rated supply of facilities for corporate entertaining - Whether separate supplies of zero-rated transport and standard-rated catering - Value Added Tax Act 1983, s. 2(1), 16(2) and Sch. 5, Grp. 10, item 4(a) (Value Added Tax Act Value Added Tax Act 1994 section 4 subsec-or-para (1) section 30 subsec-or-para (2) schedule 8 group 81994, ss. 4(1), 30(2) and Sch. 8, Grp. 8, item 4(a)).
The issue was whether in hiring out a boat for river trips on the Thames, with catering included, the appellant was making a single standard-rated supply of entertainment facilities or separate supplies of zero-rated transport and standard-rated catering.
The appellant was the representative member of a group which, at the time of the supplies, included Voyager Clubs Ltd (Voyager). Voyager operated a vessel known as the MV Elizabethan which was hired out for functions such as dinner parties, wedding receptions and corporate entertaining. The customers, who could be private individuals or companies, could choose from a number of round trips and choose a menu from the range offered. Voyager provided a crew and the catering was sub-contracted to an independent company. In addition to the transport and catering, Voyager, upon request, also provided entertainment for an extra charge.
When invoicing the customers Voyager showed separate charges for catering or cover charges, entertainment and boat hire, zero-rating the latter.
Customs took the view that what was being provided was a single standard-rated supply and raised an assessment accordingly.
The appellant contended that in the circumstances it was reasonable, in order to give effect to the scheme of the tax, to treat the supplies as separately made, the transport being zero-rated and the catering standard-rated.
The commissioners contended that only a small part of the charge made for the boat hire reflected the transport elements and the greater part was for the hire of function suites for corporate hospitality. The transport was not physically and economically dissociable from the rest of the supply as the charge for boat hire included the charge for the function facilities.
Held, allowing the company's appeal:
1. The legal effect of a transaction entered into by a customer with the appellant was that a number of supplies were made. These included some transport, some catering and, when required, entertainment. The element of passenger transport was an essential part of each transaction because if the customer did not take a supply of transport there was no transacton at all.
2. The contract between Voyager and a customer identified each element separately, the customer making a separate choice in relation to each. No element depended upon any other element, save that there had to be some supply of transport.
3. The fact that the supply of passenger transport could not be omitted but the supplies of catering and entertainment could, pointed to the conclusion that there were three separate supplies.
4. It was practicable and realistic under the scheme of the Value Added Tax Act 1983 to separate and zero-rate the supply of passenger transport.
5. It was not realistic to identify a separate supply of transport and the hire of the function suites in return for the separate charge for boat hire. The function suites were integral components of the supply of transport.
21. On behalf of the appellant Mr Barlow referred to s. 3(2)(a) and 10 of the Value Added Tax Act 1983 and submitted that, although these provisions defined supply and the value of any supply, there were no provisions in the Value Added Tax Act 1983 which assisted in determining whether a transaction consisted of one supply taxable at one rate or of more than one supply taxable at different rates. It was, therefore, necessary to refer to the authorities in order to establish the principles which should be applied.
22. He cited:
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(2) British Railways Board v C & E Commrs VAT(1977) 1 BVC 116 as authority for the view that whether there was a single supply or two separate supplies depended upon the legal effect of the transaction considered in relation to the words of the statute and that was a matter of law; and also that the basic question which had to be asked was: what was supplied in consideration of the payment received?;
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(3) British Airways plc v C & E Commrs VAT(1990) 5 BVC 97 as authority for the view that there would be a separate supply if it did not, in substance and reality, form an integral part or component of the main supply; and also (at p. 101H) as authority for the view that where the supply was one of transportation coupled with the availability of a catering supply at a grade to be chosen by the passenger then those were distinct and separate supplies;
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(4) Rayner & Keeler Ltd VAT(LON/90/306) No. 5803; [1991] BVC 1346 as authority for the view that the supplies should be identified and, if a separate part of the transaction could be omitted, that would point towards the conclusion that there was a separate supply; also, that the scheme of the tax was more likely to be followed if supplies were treated as separate and they should be treated as separate if it was practicable and realistic to do so; and
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(5) Card Protection Plan Ltd v C & E CommrsVAT[1994] BVC 20 as authority for the view that, in deciding whether there was one supply or two, the test was whether one element was incidental to, or an integral part of, the other.
23. Applying those principles to the facts of the present case Mr Barlow submitted that Voyager always supplied transport and frequently supplied catering as well but the customer could choose the type of catering required. Separate charges were made for the boat hire on the one hand and for the catering on the other. In substance and reality Voyager made separate supplies of transport and catering. The scheme of the tax was to zero-rate supplies of transport and, as it was both practicable and realistic to treat the supplies as separate, that should be done in order to give effect to the scheme of the tax. The supply of catering was not incidental to, nor an integral part of, the supply of transport and the supply of transport was not incidental to, nor an integral part of, the supply of catering.
24. Mr Barlow distinguished the decision in The Peninsular & Oriental Steam Navigation Co VAT(LON/94/1146) No 13,478; [1996] BVC 2435 where the tribunal held that a supply of a cruise, which included food, accommodation, entertainment and transport was a single zero-rated supply of transport. The facts of the present case were different and, in particular, Voyager made a number of supplies depending on what the customer required. Accordingly, the appellant did not contend that Voyager made a single supply of transport but did contend that Voyager made separate supplies of transport and catering.
25. Finally, Mr Barlow cited River Barge Holidays Ltd(LON/77/345) No. 572 where the tribunal had held that a holiday cruise on the Thames for an inclusive charge to cover accommodation, meals, sightseeing tours and transport should be apportioned between accommodation and catering supplies which should be taxed at the standard rate and transport which should be zero-rated. In that case it had been agreed by Customs that there were separate supplies and the issue was the method of apportionment.
26. On behalf of Customs Mr Davies submitted that, in substance and reality, Voyager had supplied function suites on water which contained facilities for corporate entertaining. Although there was an element of travel in the charge for boat hire that charge was not exclusively for transport and only a small part of it reflected the travel element. The boat hire charge also included the hire of the function suites for corporate entertainment and if these had been hired on the mainland that would not have been a zero-rated supply. It was not possible to regard the supply of transport as physically and economically dissociable from the rest of the supply as the charge for boat hire included the charge for the function facilities.
27. Mr Davies adopted the analysis of the legal principles proposed by Mr Barlow but submitted that the travel and transport was "part and parcel" of an overall supply of function facilities. The MV Elizabethan was not available for hire solely as a means of transport and the customer had to take a supply of catering also. The fee charged by Voyager was a fee for the hire of the two suites on the two decks and the catering facilities. What Voyager supplied was one package of the function suites and the catering and entertainment.
28. Mr Davies relied on the dicta of Lord Donaldson MR inBritish Airways at p. 101H to the effect that if a rail passenger bought a ticket and was supplied with meals free of charge for as long as the journey lasted that would be a single supply. In the present appeal the customer had to have both the transport and the catering and the fee paid to Voyager covered the total supply. The customer did not have the discretion to choose whether to take the supply of catering. Mr Davies submitted that in the present case the single supply would be of corporate entertainment facilities and not of transport as the passengers were not travelling...
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