VAT and occupation of land–British Airports Authority cannot charge VAT on supply of shop premises at Heathrow, even though licensee company bound to sell certain goods at certain times
This was an
appeal by the British Airports Authority against a decision of the London Value
Added Tax Tribunal dated March 13 1975 holding that a service provided by the
authority under the terms of an agreement made by it with Hills London Shops
Ltd for the provision of duty-free and duty-charged shops at London Airport did
not attract VAT. The respondents were the Commissioners of Customs and Excise.
Mr P Whiteman
(instructed by M W J Nott) appeared for the appellants, and Mr J Rogers QC and
Mr H K Woolf (instructed by G Krikorian) represented the respondents.
Giving
judgment, LORD WIDGERY said that the appellants’ case was that they provided
shops at London’s Heathrow Airport, both on what was called the ‘land side’ and
on the ‘air side’ of the no 1 terminal, and that under the terms of an
agreement, Hills London Shops Ltd traded from the shops. Under the agreement
Hills were to sell certain goods and to keep the shops open for certain hours.
The repair and maintenance of the shops was the responsibility of the
appellants. The appellants did not provide any fixtures or equipment for the
shops, and by clause 5 of the agreement it was stated that nothing therein
should be deemed to create a tenancy. The appellants, who had to pay VAT on
services provided for them in preparing the shops, had sought to include a VAT
element in their concession agreement with Hills. The question was whether the
supply of the services contained in the concession agreement was a taxable
supply within the meaning of the Finance Act 1972. It was not in issue that the
supply of the privilege was a supply made by a taxable person, and was
therefore on its face a taxable supply. But the tribunal had rejected the
appellants’ claim, holding that Hills obtained a right to occupy premises and
sell from them, and that that was a right to occupy land, which was not
chargeable. Counsel for the appellants now urged that the agreement gave two
rights, one of which attracted VAT, and that therefore there should be an
apportionment. It was claimed that the chargeable element was the right to
sell. Counsel cited Commissioners of Customs and Excise v Automobile
Association [1974] 1 WLR 1447 in support of his claim.
In his (Lord
Widgery’s) judgment, the true nature of the agreement was to give Hills a right
to occupy land. The fact that Hills, when occupying the land, had to sell
certain goods did not prevent that which had been supplied from being a right
to occupy land. In his opinion the tribunal had reached the correct decision
and the appeal should be dismissed.
Agreeing, O’CONNOR
J said that there were no grounds in the present case for holding that the
tribunal was wrong, but it did not necessarily follow that there would be no
case where there was an agreement to occupy land and an apportionment was
possible.
LAWSON J also
agreed, and the appeal was dismissed with costs. The appellants were given
leave to appeal.
