C Jenkin & Son Ltd v Commissioners of HM Revenue and Customs
Norris J and Judge Greg Sinfield
Value added tax – Zero rating – Caravan site – Appellant supplying residential caravans under leasing agreements to persons for use as homes on sites under separate pitch agreements between occupiers and site owners – Appellants appealing against VAT assessments – First-tier Tribunal (FTT) allowing appeal – Appellant appealing – Whether appellant making zero-rated supply of caravan or standard-rated supply of accommodation in a caravan – Whether FTT wrongly holding assessment had no legal basis – Appeal allowed
The appellant supplied caravans to the travelling community on long-term leases for use as their homes on sites under separate pitch agreements between occupiers and site owners, usually, local authorities. The appellant treated those supplies as zero-rated items for VAT purposes by items 1 and 3 of Group 9 of Schedule 8 to the Value Added Tax Act 1994. In 2013, the respondent commissioners decided that the supplies were of accommodation in caravans and, as such, excluded from zero-rating by note (b) to Group 9. The respondents considered that, as supplies of accommodation, the supplies were grants of an interest in or right over land or a licence to occupy land and exempt under item 1 of Group 1 of Schedule 9 to the 1994 Act. The respondents issued assessments to recover input tax of £481,068 that had been reclaimed by the appellant on the grounds that the input tax was attributable to exempt supplies.
The appellant appealed to the First-tier Tribunal (FTT) when both parties agreed that there was no legal basis on which the supplies could be held to be exempt. The FTT allowed the appeal holding that the caravans were used, and intended to be used, as people’s homes to live in as residential accommodation and, as such, were excluded from zero-rating. As everyone agreed that the appellant’s supplies were not exempt and the FTT had found that the supplies were excluded from zero-rating, the only possible conclusion was that the supplies were chargeable to VAT at the standard rate. However, as no-one had argued that the supplies were standard-rated (and the respondents had supported the conclusion only reluctantly) the decision was not authority for that conclusion, even though it was probably right. The FTT went on to consider the validity of the assessments and held that, as it had not been established that the appellant made exempt supplies, the assessments lacked any legal basis and had to fail: [2015] UKFTT 242 (TC).
Value added tax – Zero rating – Caravan site – Appellant supplying residential caravans under leasing agreements to persons for use as homes on sites under separate pitch agreements between occupiers and site owners – Appellants appealing against VAT assessments – First-tier Tribunal (FTT) allowing appeal – Appellant appealing – Whether appellant making zero-rated supply of caravan or standard-rated supply of accommodation in a caravan – Whether FTT wrongly holding assessment had no legal basis – Appeal allowed
The appellant supplied caravans to the travelling community on long-term leases for use as their homes on sites under separate pitch agreements between occupiers and site owners, usually, local authorities. The appellant treated those supplies as zero-rated items for VAT purposes by items 1 and 3 of Group 9 of Schedule 8 to the Value Added Tax Act 1994. In 2013, the respondent commissioners decided that the supplies were of accommodation in caravans and, as such, excluded from zero-rating by note (b) to Group 9. The respondents considered that, as supplies of accommodation, the supplies were grants of an interest in or right over land or a licence to occupy land and exempt under item 1 of Group 1 of Schedule 9 to the 1994 Act. The respondents issued assessments to recover input tax of £481,068 that had been reclaimed by the appellant on the grounds that the input tax was attributable to exempt supplies.
The appellant appealed to the First-tier Tribunal (FTT) when both parties agreed that there was no legal basis on which the supplies could be held to be exempt. The FTT allowed the appeal holding that the caravans were used, and intended to be used, as people’s homes to live in as residential accommodation and, as such, were excluded from zero-rating. As everyone agreed that the appellant’s supplies were not exempt and the FTT had found that the supplies were excluded from zero-rating, the only possible conclusion was that the supplies were chargeable to VAT at the standard rate. However, as no-one had argued that the supplies were standard-rated (and the respondents had supported the conclusion only reluctantly) the decision was not authority for that conclusion, even though it was probably right. The FTT went on to consider the validity of the assessments and held that, as it had not been established that the appellant made exempt supplies, the assessments lacked any legal basis and had to fail: [2015] UKFTT 242 (TC).
Both parties appealed against that decision. The issues were: (i) whether, when the appellant-leased caravans to the travellers, it supplied caravans or accommodation in caravans. If the appellant supplied caravans, the supplies would be zero-rated under item 3 of Group 9 of Schedule 8 to the 1994 Act. If the supply was of accommodation in caravans, the supplies would be excluded from zero-rating by virtue of note (b) to Group 9; and (ii) whether the FTT was right to hold that the assessments were invalid.
Held: The appellant’s appeal was allowed. The respondents’ appeal was dismissed.
(1) Although “accommodation” was an ordinary word in the English language, its meaning in the context of note (b) to Group 9 was a question of law. A supply of “accommodation in a caravan” required more than simply providing the caravan. The supplies of caravans, whether by sale or lease, by the appellant were not supplies of accommodation but were supplies of items that could be used as accommodation. A supply of a caravan without the right to occupy it on a site was not a supply of accommodation but merely a supply of the caravan. The respondents had contended that all the caravans had been supplied for use on specified sites which the customer had the right to occupy and that it did not matter, for the purposes of determining whether there was a supply of accommodation, that the supplies of the caravan and the right to place the caravan on the site were provided by two different people. However, the caravans were not merely placed on the site: they were physically connected to utilities such as electricity and water as well as mains drainage. Without such facilities, it would not be possible to occupy the caravans for residential purposes and it could not be said that, without them, there was a supply of “accommodation in a caravan”. The pitch and services were provided by a third party. The appellant did not supply them and had no control over those elements. Without them, the appellant could not supply “accommodation in a caravan”. Accordingly, the appellant made zero-rated supplies by the leasing of the caravans and was entitled to credit for the full amount of input tax claimed which the respondents sought to recover by assessment.
(2) The appellant had discharged the burden of demonstrating that the amount assessed was not due because it was entitled to claim a refund of the input tax.
Tarlochan Lall (instructed by Croner Taxwise Ltd) appeared for the appellant; Marika Lemos (instructed by the General Counsel and Solicitor to HM Revenue and Customs) appeared for the respondents.
Eileen O’Grady, barrister
Click here to read a transcript of C Jenkin & Son Ltd v Commissioners of HM Revenue and Customs
