University constructing student residences – Developers able to use buildings in vacation time – University relying upon concession by Commissioners – Issuing certificate to developers stating supply relating to building intended for qualifying use – Zero-rated supply – Commissioners deciding university not able to benefit from concession – Whether university able to rely on concession – Schedule 8 Group 5 Item 1(a)(ii) to the Value Added Tax Act 1994 – Claim allowed
Greenwich Property Ltd (the claimant) was a wholly owned subsidiary of the University of Greenwich. The university decided to construct student accommodation and to fund part of the development by means of a private finance initiative. An agreement was made with Wimpey Developments Ltd through its subsidiary, Avery Hill Developments Ltd (AHDL). The agreement provided that the university would grant a lease of the relevant site to the claimant, and that AHDL would then construct student residences, which they would maintain for 30 years. It also provided that the claimant would grant a lease of the newly constructed buildings to the university. It was recognised that the buildings would not be required for students during the summer vacations and that AHDL would be able to use them for other purposes during those periods.
Schedule 8 to the Value Added Tax Act 1994 (as amended) provided for supplies that were to be zero-rated. Group 5 Item 1 provided for: “(a) construction of a building – (ii) intended for use solely for a relevant residential purpose…”. Note 4 explained that “use for a relevant residential purpose” meant “use as residential accommodation for students”. In order to qualify for zero rating, the university was required to issue a certificate to the developer for the construction of the building as a “relevant residential” building.
In 1990 the Customs and Excise Commissioners agreed to apply a concession (the concordat). Paragraph 37 of the concordat recognised that higher education institutions may be in some difficulty in issuing certificates as some use was likely to be made of student accommodation for non-qualifying purposes during vacations. However, provided the building was clearly intended primarily for use as student accommodation for 10 years from the date of completion, it agreed that such institutions could issue a certificate. In 1996, relying upon the terms of the concordat, the university issued a certificate. The claimant granted an underlease of the new building to the university and the university granted a licence to AHDL for third parties to hire the building during the summer vacation. Those payments were to be taxable at the standard rate.
In 1999 a tax officer wrote to the claimant and the university, stating that the certificate should not have been issued because the university did not itself intend to provide the accommodation for use by others in the summer vacation but had granted AHDL a licence to occupy the building. Accordingly, the Commissioners decided that the claimant was not entitled to benefit from the concession and upheld an assessment that the claimant was obliged to account for VAT.
The claimant sought judicial review of that decision, contending that it had a legitimate expectation in accordance with the concession, whose terms it followed, that the supply would be treated as zero rated. It argued that it was therefore unlawful and unfair for the Commissioners to seek to claim the amount assessed. The Commissioners maintained that the university itself had to make the student accommodation available in the vacation in order to qualify for the concession.
Held: The claim was allowed.
1. Since the Commissioners were relieving a taxable person of a liability imposed by law, the taxable person had to demonstrate that he acted strictly in accordance with what the concession permitted and that he complied with all the conditions necessary to obtain the relief. The language in the concession was unambiguous and the university had clearly complied with it.
2. The Commissioners may not have liked the concession being used, as it was in the instant case, to reduce the amount of VAT otherwise payable by increasing input against a zero-rated supply, but there was nothing in the language of the concession that prevented it from being done. The Commissioners could have made it clear, had they so wished, that the university had to make the arrangements itself and not as a third party, but they did not. There was no overriding public interest that prevented a person from taking advantage of a concession to maximise the benefits he could legitimately expect from its terms. The claimant was entitled to rely upon the concession and the Commissioners were not entitled to raise the assessment.
Penny Hamilton (instructed by Stephenson Harwood) appeared for the claimant; Hugh McKay (instructed by the solicitor to Customs & Excise) appeared for the defendant.
Sarah Addenbrooke, barrister