Maintenance fund — Supply of property services — VAT paid in relation to provision of cleaning staff etc — New fund trustees seeking repayment of VAT — Whether supply of services was taxable supply or exempt from VAT — Tribunal dismissing appeal against assessment — High Court upholding decision — Appeal dismissed
Nell Gwynn House (“the property”) is a block of 435-luxury flats and studio apartments in Sloane Avenue, London SW3. The freehold owner granted a lease of the whole property to Nell Gwynn House Apartments Ltd (“the lessor”). A number of lettings in respect of individual flats were made to tenants either by way of lease directly from the freeholder or by sublease from the lessor. The appellants were the trustees of the Nell Gwynn House Maintenance Fund. The trustees’ source of income was threefold: (1) maintenance contributions from the tenants of 260 flats; (2) payment by tenants for the management of flats which were sublet; and (3) payment from the lessor in respect of the 160 flats owned by the lessor.
In April 1993 the trustees’ predecessors made a voluntary disclosure to the Commissioners of Customs & Excise that £134,064.47 VAT was due in relation to the provision of staff by the trustees, which had not until then been disclosed or accounted for. That sum was paid. Subsequently, the commissioners assessed a further sum of £21,786.26 for VAT and default interest upon the trustees. That assessment was notified to the present trustees, who appealed unsuccessfully against the commissioners’ decision. A VAT tribunal decided that in supplying the services of staff the trustees made a supply to the tenants within section 2.1 of the VAT Act 1983, which was taxable. The trustees appealed.
Held The appeal was dismissed.
1. It was necessary to look at the substance and commercial reality of the agreement between the parties.
2. There was a supply of services both to the lessor and to the tenant and it was done for a consideration: payment from the maintenance fund for the supply of services made by the appellants to the lessor; alternatively, the maintenance contribution made by the tenants under the lease and/or by the lessor also under the lease. The remuneration of the trustees provided for by the lease was capable of and did constitute consideration.
3. The tribunal found that the provision of maintenance services was a supply made by the maintenance trust to the lessor. The question was whether it was an exempt supply being the grant of any interest in or right over land or licensed to occupy land.
4. So far as the tenants were concerned their contributions to the maintenance fund were payments made pursuant to an obligation under the lease such that default gave rise not to some loss of the tenant’s right to avail himself of the services of the staff, but simply to a right of re-entry in favour of the lessor.
5. The supply of services by the trustees to the lessor to enable the lessor to discharge its contractual obligations to the tenants did not involve the trustees in any grant of interest in or right over land or any licence to occupy land.
Christopher McCall QC and Joseph Smouha (instructed by H H Mainprice, agents for Graham Harvey & Co) appeared for the trustees; Nigel Pleming QC (instructed by the solicitor for Customs & Excise) appeared for the commissioners.