Zombory-Moldovan (t/a Craft Carnival)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 29 May 2015 |
| Date | 29 May 2015 |
| Court | First-tier Tribunal (Tax Chamber) |
Judge John Brooks, John Robinson
Philippa Whipple QC, instructed by Cubism Law, appeared for the Appellant
Hui Ling McCarthy, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax – Craft fairs organised by appellant – General public charged admission – Space sold to stallholders to sell their products – Whether supply to stallholders an exempt supply of a licence to occupy land or composite supplies of taxable services comprising of the organisation of a craft fair – Appeal allowed.
The First-tier Tribunal (FTT) allowed Mrs Zombory-Moldovan's appeal against HMRC's decision that her supply of pitches to stallholders at the craft fairs she organised were standard-rated finding that the supplies were exempt supplies of a licence to occupy land within the Value Added Tax Act 1994 (“VATA 1994”), Sch. 9, Grp. 1.
Mrs Zombory-Moldovan organised craft and garden fairs and accounted for VAT on the admission fees paid by the public but not on the supply of spaces to stallholders which she treated as an exempt supply of land. HMRC disagreed and notified Mrs Zombory-Moldovan that the spaces fell within a “package of services” taxable at the standard rate. Mrs Zombory-Moldovan appealed to the FTT.
For Mrs Zombory-Moldovan, it was argued that only the right to use an allocated space was supplied to the stallholder and as this met the EU law criteria of “leasing or letting or immovable property”, it was an exempt supply. For HMRC, it was argued that rather than an exempt licence to occupy land, Mrs Zombory-Moldovan supplied stallholders with a taxable licence to use land and that the land was not an ancillary supply but of central and indispensible importance to the single supply, namely the organisation of a craft or garden fair at which stallholders were able to exhibit their wares for sale.
A number of authorities were referred to including R & C Commrs v Aimia Coalition Loyalty UK Ltd (formerly known as Loyalty Management UK Ltd) VAT[2013] BVC 67 and R & C Commrs v Secret Hotels2 Ltd (formerly Med Hotels Ltd) VAT[2014] BVC 9 regarding the need to have regard to the economic reality of any arrangements in determining the nature of a supply; R & C Commrs v Bryce (t/a The Barn) VAT[2011] BVC 1,589 and Faaborg-Gelting Linien A/S v Finanzamt Flensburg ECASVAT(Case C-231/94) [1996] BVC 436 on the issue of single or multiple supplies; and Swedish State v Stockholm Lindöpark Aktiebolag ECASVAT(Case C-150/99) [2001] BVC 93 and Belgium v Temco Europe SA ECASVAT(Case C-284/03) [2007] BVC 308 regarding Directive 2006/112/EC, art. 135 which requires member states to exempt the supply of “the leasing or letting of immovable property” and the fundamental characteristics of such a supply being to confer rights to occupy the property as if that person were the owner and to exclude any other person from enjoyment of such a right.
The FTT considered that the effect and economic reality of the agreement between Mrs Zombory-Moldovan and a stallholder was that she granted the stallholder a licence to offer for sale specific types of goods at the craft and garden fairs. The FTT considered that the position could be likened to the letting of market stalls in Tameside Metropolitan Borough Council VAT(1979) 1 BVC 1,103, which were held to be a licence to occupy land and, particularly, the supply of stands at exhibitions in Miller Freeman World-wide plc (No. 2) VAT[1998] BVC 2,197, which were also held to be the supply of a licence to occupy land and concluded that the stallholders occupied the pitches at the fairs as owner to the exclusion of any other person.
The FTT also considered the reference by the ECJ in Temco to the letting of immovable property as being usually a relatively “passive” activity that did not generate added value from other industrial or commercial activities but in light of the examples given, the FTT considered that the supply to the stallholders could not fall within the categories of activities envisaged by the ECJ as being industrial or commercial in nature.
Accordingly, the FTT found that the supply of the space to stallholders by Mrs Zombory-Moldovan was an exempt supply of a licence to occupy land and allowed the appeal.
Mrs Zombory-Moldovan organised craft and garden fairs charging an entrance fee to the public and charging stallholders for a space at the fair to exhibit their wares for sale. Mrs Zombory-Moldovan contended that the supplies to stallholders were exempt as the supply of a licence to occupy land within VATA 1994, Sch. 9, Grp. 1, item 1. The FTT has confirmed that as the supply was of a right to occupy a pitch as owner to the exclusion of any other person, it was an exempt supply of a licence to occupy land.
[1] Craft Carnival, the sole trade of Mrs Kati Zombory-Moldovan, is a business that organises craft and garden fairs in and around Dorset. Spaces are sold to businesses and individuals involved in various crafts to enable them to sell their products at a Craft Carnival fair to which the general public are admitted on payment of a reasonable entrance charge. Following her registration for VAT, which took effect from 1 August 2003, Mrs Zombory-Moldovan has accounted for VAT on the admission fees paid by the public but not on the supply of spaces to stallholders which she has treated as an exempt supply of land.
[2] However, HM Revenue and Customs (“HMRC”), in a letter dated 15 May 2013, notified Mrs Zombory-Moldovan that the supplies to stallholders were “not capable of falling within the land exemption” but should more properly be described as a “package of services” taxable, at the standard rate, the purpose of which was to provide the stallholders with an opportunity to trade. This decision was upheld following a review. Mrs Zombory-Moldovan was notified of this in a letter from HMRC dated 24 October 2013. On 21 November 2013 she appealed to the Tribunal.
[3] Ms Philippa Whipple QC, who appeared for Mrs Zombory-Moldovan, contends that only the right to use an allocated space is supplied to the stallholder and, as this meets the EU law criteria of “leasing or letting of immoveable property” it is an exempt supply. Alternatively, if, as HMRC contend, there are supplies “above and beyond the right to use the particular space” she submits the supply in question remains exempt either because there is a single supply of property which predominates to which the other elements are ancillary or because there are a number of essential elements making a composite whole, the essential feature of which is the right to land.
[4] Miss Hui Ling McCarthy, who appeared for HMRC, argues that rather than an exempt licence to occupy land Mrs Zombory-Moldovan supplies stallholders with a taxable licence to use land. She contends that the land, like food in the supply of restaurant services, is not ancillary but of central and indispensible importance to a single supply, namely the organisation of a craft or garden fair at which stallholders are able to exhibit their wares for sale.
[5] In addition to the sworn oral evidence of Mrs Zombory-Moldovan we were provided with a bundle of documents. These included copies of correspondence between the parties, copy of a letter sent to potential stallholders, comments from exhibitors and visitors to craft fairs organised by Craft Carnival, the Craft Carnival Craft and Garden Fairs 2014 brochure, price lists for stallholders, pages from Craft Carnival's website as well as copies of the booking forms for stallholders with terms and conditions attached.
[6] On the basis on this evidence we make the following findings of fact.
[7] Mrs Zombory-Moldovan, trading as Craft Carnival, has organised craft fairs at various venues in and around Dorset since 1988. In a typical year there would be five or six such fairs with each taking place over the two days of a weekend or three days of a Bank Holiday weekend. Although some are held wholly or mainly indoors most fairs take place on land close to a stately home or historic property such as Sherborne Castle, Kingston Lacey or Somerley.
[8] As the “Welcome” page on its website explains:
Craft Carnival organise major craft and garden shows at unique and beautiful venues in and around Dorset.
Each of our events showcase a tempting range of the best traditional and contemporary crafts, where you can see and meet crafts people in action and choose from a wide variety of handmade items – or commission something special.
Crafts range from woodturning to fine jewellery, from the handmade pottery to one-off fabrics, and from ironworking to traditional hurdle-making. Our exhibiters create special and highly desirable objects of utility and beauty from almost every imaginable material, using age old skills which can take many years to master.
Most of our events also feature a huge selection of plants, garden furniture and ornaments from specialist suppliers, always ready to give practical advice if you need it. There is something for every garden lover, whether you are looking for a rare herb or fine traditional handmade outdoor furniture that will stand the test of time.
All of our shows take place in and around specious marquees, with a separate refreshments tent. The marquees at our Christmas event at Kingston Lacey are heated. Even if the weather is unpredictable, there is always plenty to see and do under cover!
Although this would appear to be directed towards the public who would pay to attend the fairs the website provides a link for “Exhibitors” to provide their details to receive information about booking stalls.
[9] In addition to the erection of marquees, which are hired for the duration of a fair, Mrs Zombory-Moldovan arranges for the provision of other necessary temporary facilities including portable toilets, electrical generators and...
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