Wakefield College
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 November 2013 |
| Neutral Citation | [2013] UKFTT 731 (TC) |
| Date | 21 November 2013 |
| Court | First Tier Tribunal (Tax Chamber) |
[2013] UKFTT 731 (TC)
Judge Richard Barlow.
Kevin Prosser QC appeared for the Appellant
James Puzey of counsel appeared for the respondents.
Value added tax - Keywords - Zero rate - Building supplies - Business use - Tribunal's jurisdiction concerning concessions.
The First-tier Tribunal (FTT) heard a remitted appeal, under directions from the Upper Tribunal, on the basis that it had previously reached a conclusion regarding its lack of jurisdiction which might have been different had the tribunal been aware that the business use de minimis principle for the construction of charity buildings could have applied as a matter of statutory interpretation rather than by concession. In any event, the FTT found that part of the fee for their course. Thus, the level of business use by the taxpayer woul there was no business activity in respect of education provided to students paying only d remain within the permitted limit so that no decision was necessary on the de minimis issue. The appeal was left open for the parties to apply the principles established in the hearing.
The decision was supplementary to those previously given by the FTT [2011] TC 00948 and the Upper Tribunal [2012] BVC 1513. The appeal was remitted by the latter for the FTT to reconsider its jurisdiction in relation to the application of the de minimis principle applicable to small amounts of business use of new charitable buildings and to answer a question left open in the earlier decision regarding the business or non-business status of education funded partly by the student.
The substantive appeal concerned the construction of a new building by Wakefield College (the College) and the primary issue was whether the construction was zero-rated as being for use solely for a charitable purpose or whether a proportion of business use precluded that. An extra-statutory concession allowing 10% business use was mentioned at the earlier hearing in the FTT, but it was common ground between the parties, and on the part of both the FTT and Upper Tribunal, that a decision on whether or not that concession had been correctly applied was not a matter falling within the tribunal's jurisdiction. It was said at the Upper Tribunal hearing that the de minimis principle can be applied as a matter of statutory interpretation unless the statute clearly indicates otherwise, but the parties had not informed the FTT at the earlier hearing that de minimis business use could be ignored as a matter of statutory interpretation, and not merely of extra-statutory concession. In particular, the tribunal had not been referred to HMRC's Business Brief 39/09, dated 1 July 2009, which announced a change in HMRC's interpretation of the law to the effect that the term "solely" for a relevant charitable purpose in Value Added Tax Act 1994 ("VATA 1994") Value Added Tax Act 1994 schedule 8 group 5Sch. 8 Grp.5 item 2 could accommodate a de minimis margin of 5% business use. The Upper Tribunal held that the FTT had wrongly proceeded on the basis that the appeal should be dismissed if there was any business use of the building, however little, whereas it should have gone on to decide whether or not the extent of the business use was de minimis. Given that this matter was remitted to the FTT, the separate issue of whether the provision of education to a group of students was a business supply for VAT purposes was also remitted.
The FTT noted that the 5% business use allowance replaced the 10% concession and that it was stated in Business Brief 39/09 that HMRC interpret the law as being that 5% business use falls within the de minimis limit, presumably meaning as a matter of statutory interpretation at common law. The decision of the Upper Tribunal appeared to suggest that the FTT had jurisdiction to determine whether or not the extent of the business use of the building was de minimis and whether or not the 5% business use had been exceeded. That could not be the case if the 5% was a concession because the operation of a concession did not come within the tribunal's jurisdiction. On the other hand, observed the FTT, if the Upper Tribunal was referring only to the rule of statutory interpretation, then it would be a matter for the FTT to decide what level of business use fell within the de minimis limit and HMRC would have no right to determine at what level or on what basis that should be set. The FTT observed that, whilst being obliged to follow the Upper Tribunal's decision, the references to the 5% limit made it difficult to understand what the decision should be, so far as the de minimis principle was concerned. Matters were further complicated by the fact that the building in question was constructed before the Business Brief was issued, so the 10% concession was the only relevant document at that time. However, the FTT's dilemma was eased by the parties to the appeal agreeing that the de minimis issue did not have to be resolved by the FTT at this hearing if the remaining issue was decided in the College's favour, in which case the level of business use would fall within both HMRC's concession and the 5% limit, however they were classified.
The second issue for the tribunal concerned students who paid only part of the fee for their course and whether the payments should be regarded as non-business receipts. The College relied on the decision of the European Court of Justice in the case of EC Commission v FinlandECAS (C-246/08) [2010] BVC 1062 in support of its contention that the part payments were not consideration for business supplies. The FTT agreed and accepted that there was not a sufficiently direct link between the service and the payment for there to be a business supply and so the services to the students who made part-payment were not to be included in any calculation of the level of business use. The appeal was, therefore, left open for the parties to resolve their dispute on the basis of the principles established, following which the hearing would be resumed or the College's appeal would be allowed or dismissed.
This was a hearing in which the FTT appeared to be unsure of the directions given by the Upper Tribunal on the interpretation of the rules allowing zero-rating for the construction of a charity building to be put to a minimal amount of business use and the jurisdiction of the tribunal in relation to the allowable level of business use. The FTT avoided the need to decide the issue by finding that the business element would fall below the de minimis limit, whichever interpretation was applied.
[1]This is an additional decision further to that given by the Tribunal on 20 January 2011 and by the Upper Tribunal (Arnold J) on 20 December 2011.
[2]Arnold J remitted the case to me to consider two issues. The first is the application of the de minimis principle. The second is that I should make a finding relating to a question left open in the earlier decision.
[3]The case concerns the construction of a new building by the College and the issue is whether it was zero rated as being for use solely for a charitable purpose or whether a proportion of business use precluded that. An extra-statutory concession allowing 10% business use before the zero rating ceases to apply was mentioned at the hearing in the First Tier Tribunal. The concession provided for three specific ways in which the 10% could be calculated. It was common ground between the parties and on the part of both the First Tier and the Upper Tribunal that a decision whether or not that concession had been correctly applied, was not a matter falling within the Tribunal's jurisdiction.
[4]It was said at the Upper Tribunal hearing that the de minimis principle can be applied as a matter of statutory interpretation unless the statute clearly indicates that it cannot. That is not a controversial statement. In paragraph 13 of the Upper Tribunal's decision Arnold J said:
Unfortunately, however, the parties did not inform the Tribunal that de minimis use could be ignored as a matter of statutory interpretation, and not merely of extra-statutory concession. In particular,...
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