VAT – Zero rating – Jubilee Hall, Covent Garden – Whether used solely as village hall – Whether services provided for local community – Whether supplies in respect of refurbishment of premises to be zero-rated – VAT tribunal dismissing appeal from refusal of Customs & Excise to zero rate supplies – Appeal allowed
The appellant, Jubilee, a charitable company limited by guarantee, ran a sports and fitness centre and cafe on the ground floor of Jubilee Hall, a listed building. The objects of Jubilee, were, inter alia, to provide recreational facilities, either free or at a reasonable charge, in connection with the area of the local community generally, however the use of the facilities might be extended to the members of the public.
In 1993 Jubilee embarked upon substantial reconstruction of its premises. All the alterations were approved alterations done with listed building consents obtained from the local planning authority. Jubilee was registered for VAT and made both taxable and exempt supplies. The respondents disallowed Jubilee’s claim that supplies for the refurbishment fell to be zero rated for VAT purposes. Jubilee’s appeal to the VAT tribunal was dismissed. Jubilee appealed contending that the use of Jubilee Hall was solely ‘ as a village hall or similarly in providing social or recreational facilities for a local community’. The respondents argued that on the true construction of note(4) the answer to the questions whether Jubilee’s use was solely as a village hall and whether, in so far as the facilities were made available to those working as well as those residing in the locality, the facilities were provided for a local community, was in the negative and that furthermore, any other answer would put the United Kingdom in breach of the EC Sixth Council directive.
Held The appeal was allowed.
1. Under article 28(2) of the EC directive zero rating was permissible in respect of supplies satisfying the conditions of article 17, namely for clearly defined social reasons and for the benefit of final consumers. Note 4, which provided that use for a charitable purpose meant use by a charity ‘(b) as a village hall or similarly in providing social and recreational facilities for a local community’. Interpreting the national law, contained in section 30 of the VAT Act 1994, in the light of the wording and purpose of the directive in order to achieve the result required by it, use for the purposes of the centre fell within the statutory formula of ‘use as a village hall or similarly’. Having regard to the social purpose of article 17 the term ‘final consumer’ was to be applied only to a person who did not use exempted goods or services in the course of an economic activity. Supplies were to be considered to be for the benefit of the final consumer within the meaning of the directive. In order for supplies to be zero rated it was not necessary that a village hall should be owned, organised or administered by the community, still less was it necessary for a building owned by a charity to be so owned organised and administered. The tribunal had misdirected itself in law on that issue. Furthermore, note 4(b) did not preclude business activity.
2. It was clear that in the context of note 4 the characteristic of the village hall to which ‘similarity’ was required was similarity of function in providing social and recreational facilities for a local community. The words ‘local community’ meant not only those residing in the community but extended to those working in the locality.
3. Accordingly, Jubilee Hall was a building intended for use solely for a relevant charitable purpose and was entitled to the zero rating claimed.
Andrew Hitchmough (instructed by McKenna & Co) appeared for the appellant; Michael Kent QC (instructed by the solicitor to Customs & Excise) appeared for the respondents.