England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF
JUSTICE, CHANCERY DIVISION
(The Hon Mr Justice Jacob)

		Royal Courts of Justice Strand, London, WC2A 2LL
		19 February 2004

Lady Justice Arden :

1. This is an appeal from the dismissal by Jacob J of the appellant's appeal from the decision of the VAT Tribunal (Chairman, Mr Theodore Wallace) dated 20 July 1999. The Tribunal dismissed the appellant's appeal from the decision of the Commissioners that the letting of caravan sites for seasonal pitches incurred value added tax ("VAT") pursuant to schedule 9, part II, group 1 to the Value Added Tax Act 1994 ("VATA"). This appeal, therefore, raises the question of the scope of the exemption in article 13B(b) of the EC Sixth VAT Directive (77/388/EEC) ("the Sixth Directive"), which group 1 of part II to schedule 9 to VATA (set out in material part below) was designed to implement.
2. Article 13B provides as follows:-

"B. Other exemptions

Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse;

(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;

(b) the leasing or letting of immovable property excluding:

1. the provisions of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;

2. the letting of premises and sites for parking vehicles;

3. lettings of permanently installed equipment and machinery;

4. hire of safes.

Member States may apply further exclusions to the scope of this exemption;

(c) supplies of goods used wholly for an activity exempted under this Article or under Article 28(3)(b) when these goods have not given rise to the right to deduction, or of goods on the acquisition or production of which, by virtue of Article 17(6), value added tax did not become deductible;

(d) the following transactions:

1. the granting and the negotiation of credit and the management of credit by the person granting it;

2. the negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees by the person who is granting the credit;

3. transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection and factoring;

4. transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors' items; 'collectors' items' shall be taken to mean gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest;

5. transactions, including negotiation, excluding management and safe-keeping, in shares, interests in companies or associations, debentures and other securities, excluding:

documents establishing title to goods,

the rights or securities referred to in Article 5(3);

6. management of special investment funds as defined by Member States;

(e) the supply at face value of postage stamps valid for use for postal services within the territory of the country, fiscal stamps, and other similar stamps;

(f) betting, lotteries and other forms of gambling, subject to conditions and limitations laid down by each Member State;

(g) the supply of buildings or parts thereof, and of the land on which they stand, other than as described in Article 4(3)(a);

(h) the supply of land which has not been built on other than building land as described in Article 4(3)(b)."

3. The question on this appeal is whether article 13B(b) permits a member state to charge VAT on the supply of licences for the parking of static caravans. The Commissioners contend that article 13B(b) not only exempts the leasing or letting of immovable property and sets out a number of specific exclusions from this exemption. It also gives the member states an option to apply further exclusions to the scope of the exemption. I will refer to this provision as the "tailpiece member state option".
4. The appellant contends that it is not clear as a matter of Community law whether the tailpiece member state option confers a power to create a charging provision of the nature to be found in schedule 9. It seeks an order that this question be referred to the European Court of Justice ("the European Court"). In short, it contends that the licensing of static caravans on seasonal pitches should be exempt from VAT if they are used for residential purposes because the policy behind the exemption in article 13B(b) is that the supply of land to final consumers on a long-term basis, particularly residential consumers, should be exempt.
5. Under the transactions in question in this case, clients of the appellant are typically purchasers of an eight year licence to occupy a particular site. This site is a slab of concrete on a camping site with access to gas, water and electricity. The camping site provides other facilities but clients who desire to use these facilities must purchase a separate pass and we are not concerned with the provision of those services. As to the terms of the licences in question, paragraph 3 of the judge's judgment contains a convenient summary:-

"3. There are restrictions as to what the owners can do on the sites. In particular they may not live in their caravans as a permanent address and may not stay overnight the 3 months December to February. During those 3 months they can have access to their caravans but not stay. The caravan sites have the sort of amenities one would expect for a holiday site such as swimming pools, entertainment facilities and so on. In essence, therefore, what the appellants provide their customers with is a place to keep their caravans for holiday use and not permanent residential use. The customers are free (during the permitted times only) to let their caravans for use by others. Some do this. Others choose to live in their caravans over the summer."

6. Group 1 of schedule 9, part II to VATA provides as follows:-

"GROUP 1 – LAND

1. The grant of any interest in or right over land or of any licence to occupy land, or, in relation to land in Scotland, any personal right to call for or be granted any such interest or right, other than:

(a) the grant of the fee simple in:

(i) a building which has not been completed and which is neither designed as a dwelling or number of dwellings nor intended for use solely for a relevant residential purpose or a relevant charitable purpose;

(ii) a new building which is neither designed as a dwelling or number of dwellings nor intended for use solely for a relevant residential purpose or a relevant charitable purpose after the grant;

(iii) a civil engineering work which has not been completed;

(iv) a new civil engineering work;

(b) a supply made pursuant to a developmental tenancy, developmental lease or developmental licence;

(c) the grant of any interest, right or licence consisting of a right to take game or fish unless at the time of the grant the grantor grants to the grantee the fee simple of the land over which the right to take game or fish is exercisable;

(d) the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering;

(e) the grant of any interest in, right over or licence to occupy holiday accommodation;

(f) the provision of seasonal pitches for caravans, and the grant of facilities at caravan parks to persons for whom such pitches are provided;

(g) the provision of pitches for tents or of camping facilities;

(h) the grant of facilities for parking a vehicle;

(j) the grant of any right to fell and remove standing timber;

(k) the grant of facilities for housing, or storage of, an aircraft or for mooring, or storage of, a ship , boat or other vessel;

(l) the grant of any right to occupy a box, seat or other accommodation at a sports ground, theatre, concert hall or other place of entertainment

(m) the grant of facilities for playing any sport or participating in any physical recreation; and

(n) the grant of any right, including :

(i) an equitable right,

(ii) a right under an option or right of pre-emption, or

(iii) in relation to land in Scotland, a personal right,

to call for or be granted an interest or right which would fall within any of paragraphs (a) or (c) to (m) above."

NOTES

…

"(13) 'Holiday accommodation' includes any accommodation in a building, hut (including a beach hut or chalet), caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use, but excludes any accommodation within paragraph (d).

(14) A seasonal pitch is a pitch:

(a) which is provided for a period of less than a year, or

(b) which is provided for a year or a period longer than a year but which the person to whom it is provided is prevented by the terms of any covenant, statutory planning consent or similar permission from occupying by living in a caravan at all times throughout the period for which the pitch is provided."

7. A provision of the kind mentioned in Note 14(b), which prevents a person from occupying by living in a caravan at any time during the period of a licence, has been referred to in argument as a "no sleep" provision, and I will so refer to it.
8. Thus, by virtue of group 1, hotel and holiday accommodation are excluded from the exemption for the letting of land. Moreover, by virtue of paragraph 9 of schedule 6 to VATA, where hotel accommodation is occupied for more than twenty-eight days, the consideration chargeable to VAT is reduced to the consideration for the facilities other than the supply of accommodation. This provision was enacted as a result of a derogation by the European Commission pursuant to article 27 of the Sixth Directive.
9. The purchase of static caravans and houseboats is zero-rated by virtue of group 9 in schedule 8 to VATA. Note (b) to group 9 states that the exemption does not include "the supply of accommodation in a caravan or houseboat". Accordingly, payments for such accommodation will be standard-rated.
10. Article 13C, which I need not set out, gives member states the right to allow taxpayers a right of option for taxation in the case of letting of immovable property. This will enable taxpayers who exercise the option to deduct VAT on their purchases from the VAT for which they are liable to account to the Commissioners.
11. The scheme of the Sixth Directive with respect to the letting of immovable property is thus that, subject to certain specified exceptions, and to other exceptions as laid down by member states, the letting of immovable property should be exempt from VAT (unless the taxpayer elects for taxation). In broad terms, the exceptions specified in the Sixth Directive relate to hotel accommodation and a limited number of commercial lettings. The rationale for excluding hotel and similar accommodation was explained in the explanatory memorandum accompanying the proposal for the Sixth Directive (Supp. 11/73) as follows:-

"… it should be noted that in the Member States the letting of immovable property is generally exempted on technical, economic and social grounds. But the arguments that justify the exemption of lettings of premises as dwellings … no longer apply in the case of hotel premises."

12. Article 13B(b) should be read with article 13B(g) and (h), which also relate to land. The reasons for these exemptions were more fully explained by Advocate General Jacobs in Blasi v Finanzamt München 1 [1998] STC 336:-

"15. Under the directive the supply and leasing of immovable property are in principle exempt from VAT (see art 13B(b), (g) and (h)). Those exemptions reflect the particular difficulties in applying VAT to such goods. Unlike ordinary goods, land is not the result of a production process; moreover, buildings, once constructed, may change hands many times during their life, often without being subject to further economic activity (supplies consisting in the alteration or repair of a building are in any event separately taxable as supplies of services). Under the Sixth Directive the charge to VAT is therefore limited in principle to the supply of building land or of new buildings and the land on which they stand. (Member states are permitted to grant taxable persons the right to opt to tax the supply or letting of immovable property under art 13C of the directive. The option is provided for with commercial property in mind. A vendor or lessor may prefer taxation of the supply or letting of commercial property to a taxable person who uses the property for the purposes of his economic activity and therefore has the right to deduct the tax charged. The vendor or lessor will then himself have the right to deduct any VAT incurred on the purchase, leasing, alteration or refurbishment of the property. The incurring of irrecoverable VAT by taxable persons in relation to the property is thereby avoided.) The preparation of land for development entails economic activity enhancing the value of the land; and the supply of a new building marks the end of a production process. Thereafter repeated taxation of immovable property each time it is sold would not be justified. The same applies to the letting of such property, which is normally a comparatively passive activity not entailing significant added value; although an economic activity for the purposes of art 4 of the Sixth Directive, the letting of immovable property is therefore in principle exempt from tax (it may be noted however that it was thought necessary to include an express provision in art 4(2) to make it clear that the 'exploitation of tangible … property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity' within the meaning of the Sixth Directive).

16. However, while generally exempting the leasing or letting of immovable property, art 13B(b) also provides for exclusion of certain transactions from exemption. The common feature of those transactions is that they entail more active exploitation of the immovable property justifying further taxation in addition to that levied upon its initial sale."

13. Thus the policy underlying the exemption of the letting of property is to exclude from VAT transactions which involve simply the long-term, passive occupation of property rather than economic activity. After land has been developed, it is usually simply enjoyed. However, this is not necessarily the case. Where it is let for holiday or storage purposes, there would, in my judgment, be a "more active exploitation" of the property.
14. Mr Roderick Cordara QC, for the appellant, submits, rightly, that the Sixth Directive must be construed in the light of its recitals. These make it clear that the general policy of the Sixth Directive is that charging provisions on VAT should be uniformly applied across the European Union. For example, it provides that there should be a common list of exemptions. However, the tailpiece member state option in article 13B(b) clearly envisages that member states may have different exclusions from the exemption for the letting of immovable property. These exclusions must not restrict the exclusions specified in article 13B(b): see Skatteministeriet v Henriksen [1990] STC 768.
15. Mr Cordara stresses the anomalies in the "no sleep" provision. The licensee need not remove the caravan during the period that he may not occupy the caravan by living in it. The period when he cannot occupy it by living may be as short as one night. The licensee need not be prevented from visiting the caravan during that period. The caravan is still being used by the final consumer. The fact that the licensee may not occupy it by living for a short period does not mean that the caravan is not being used for the purposes of a dwelling. He could just go away on holiday. In any event, the Sixth Directive draws no distinction between a person's first and second home. Mr Cordara submits that the tailpiece member state option must be subject to limitations. On behalf of the Commissioners, Mr Rupert Anderson QC accepts that the tailpiece member state option has been used to adopt limitations of a similar character to those specified in article 13B(b) of the Directive.
16. In his judgment, Jacob J held that it was acte clair that the appellants were outside the exemption in article 13B(b). He agreed with the Tribunal that the provision of a site for a caravan was not clearly within article 13B(b)(1) on the grounds inter alia that the word "accommodation" was not apt to describe the provision of a concrete slab. There is no appeal on that point. As to the tailpiece member state option, Jacob J held that under the jurisprudence of the European Court the power to define further exclusions from the exemption was wide. He relied upon the opinion of Advocate General Jacobs in the Blasi case and the opinion of Advocate General La Pergola and the judgment of the European Court in Amengual Far v Amengual Far [2002] STC 382. The judge rejected the submission that the tailpiece member state option could not be used to deprive an ultimate consumer of the exemption on the footing that in the Far case the court upheld the exclusion of all lettings, other than lettings exclusively for residential purposes.
17. The finding of the Tribunal was that some of the caravans were used for sub-letting as well as for occupation. It calculated that caravans were let for an average of 3.4 weeks per annum per owner. The judge accepted that sub-letting was a form of non-dwelling use. As the European Court in the Far case had upheld the exclusion from the exemption of all letting for non-dwelling purposes, the judge considered that it was possible to exclude from the exemption the particular kind of non-dwelling use in point with seasonal pitches.
18. The appellant argued before the judge that licensees of seasonal pitches for caravans were treated in a different way from persons who had long stays in hotels and who would therefore be entitled to the reduced rate in paragraph 9 of schedule 6 to VATA. The judge found that this difference did not amount to discrimination on the basis that the tailpiece member state option in article 13B(b) conferred a wide discretion.
19. Mr Cordara's argument on discrimination derives support from the decision of HHJ Stephen Oliver QC, Chairman of the London VAT Tribunal, in Ashworth v Commissioners of Customs & Excise [1994] VATTR 275. In this case, the taxpayer had a long lease of a lodge which she was not permitted to occupy for one month a year. The Tribunal held that there was unjustifiable discrimination between the position of the taxpayer and the position of lessees generally of property. The case turned on discrimination, and did not involve any issue as to limitations on the tailpiece member state option.
20. Mr Cordara relies principally on the Henriksen case, Lubbock Fine & Co v Commissioners of Customs & Excise [1994] STC 101, the Blasi case and the Far case. I will consider each of those cases in turn, taking them as Mr Cordara did in chronological order.
21. In the Henriksen case, the question was whether the letting of covered garages was within exclusion 2 to article 13B(b). Advocate General Jacobs answered this question in the negative. The European Court disagreed but held that the particular transactions were exempt from VAT since the garages were ancillary to houses. Mr Cordara submits that the opinion of Advocate General Jacobs in the Henriksen case shows that there are limits to the discretion conferred by the tailpiece member state option, including limits based on the economic effects of the activity. He relies on the opening part of the following passages from the opinion of Advocate General Jacobs. Having referred to the opening words of article 13B (set out above) the Advocate General said:-

"It must be concluded that to a certain extent, the directive leaves the member states free to determine in their national legislation whether or not the leasing or letting of immovable property is to be liable to value added tax if the member state can show that that is necessary to ensure 'the correct and straightforward application' of the exemptions and to prevent 'any possible evasion, avoidance or abuse'. Thus art 13B(b) does not give the member states an unlimited power to levy value added tax on the leasing or letting of immovable property."

22. Advocate General Jacobs concluded:-

"The discretion conferred by those words [the tailpiece member state option] is broad, and while that discretion is no doubt subject to certain limits, there does not seem to me to be any limitation which can be read into the article which would preclude a member state, if it chose to do so, from extending the exclusion provided for in respect of sites for parking vehicles so as to cover also individual closed garages of the kind in issue in this case." (paragraph 22)

23. It was unnecessary for the European Court to comment on the proposition that the tailpiece member state option was subject to limitations. In my judgment, the opinion of Advocate General Jacobs emphasises the breadth of the discretion in the tailpiece member state option, and the European Court appears to have accepted this approach. In the light of this and the conclusion of the Advocate General on the facts of the case, and in the light of the fact that the opening words of article 13B refer to the conditions for exemptions which member states are required to allow, rather than optional exclusions from exemptions, I do not consider that the extract from the Advocate General's opinion first quoted above can be read as an exclusive statement of the circumstances in which the tailpiece member state option can be exercised.
24. In the Lubbock Fine case, the question was whether a surrender of a lease was under Community law exempt from VAT where the original grant of the lease had been exempt. The European Commission argued that the tailpiece member state option could only be exercised to introduce additional exclusions "of the same type or nature as those already set out in" the subparagraph of article 13B(b). The Commission contended that that view was confirmed by the preparatory documentation drawn up prior to coming into force of the Directive. The Commission also pointed out that the extent of the exclusions was to be determined by applying the criteria in the introductory wording of article 13B. Advocate General Darmon rejected the Commission's view. He expressed the opinion that the Commission's view that the eiusdem generis principle of interpretation limiting the power of member states under the tailpiece member state option was incorrect. He asked rhetorically: "What is the genus?".
25. The European Court held that the tailpiece member state option could not be relied upon on the facts of that case. Accordingly, the European Court did not express a view on the breadth of the discretion conferred by the option. The Court effectively adopted the opinion of Advocate General Darmon that the letting and surrender of immovable property produced symmetrical effects and that, therefore, it was not open to member states to draw distinctions between lettings (which are exempt) and surrenders.
26. In the Blasi case, the question was whether a provision of German domestic law, which imposed VAT on lettings of hostel accommodation for less than six months was compatible with article 13B(b). I have already set out above an extract from the opinion of Advocate General Jacobs in this case. In an earlier passage in his opinion, Advocate General Jacobs returned to the point, made in the Henriksen case, that the discretion conferred by the tailpiece member state option was a broad one. He pointed out that an exclusion from an exemption did not have to be construed strictly. Consistently with this, he opined that the power of the member states to define the conditions for sectors with a similar function for the purposes of article 13B(b)(1) should be given a broad meaning:-

"12. The last sentence of art 13B(b) is broadly worded so as to allow the member states a large degree of discretion in placing limits on the scope of the exemption in art 13B(b). As the court stated in Henriksen [1990] STC 768 at 779, [1989] ECR 2763 at 2782, para 21, 'member states are free to limit the scope of the exemption by providing for additional exclusions'. Unlike exemptions, which generally fall to be construed narrowly because they constitute exceptions to the general principle that turnover tax is levied on all supplies for consideration made by a taxable person (see, for example, Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiële (Case 348/87) [1989] ECR 1737 at 1753, para 13), the exclusion of transactions from exemption is in conformity with that general principle. I see no Community interest in seeking to interpret narrowly the discretion granted to member states by that provision to bring further transactions within the scope of the charge to tax.

13. It might therefore have been possible for Germany to justify the provision on the basis of the last sentence of art 13B(b). It argues, however, that the provision can be based on art 13B(b)(1) …"

27. At paragraph 22 of his opinion, Advocate General Jacobs again referred to the tailpiece member state option. He considered that it was appropriate for a member state to take into account the practical difficulties arising out of the exclusions from an exemption. He gave the example of a residential caravan on a camping site and expressed the view that it would be difficult for the owner of the camping site to apply a test of whether the person occupying the caravan was doing so as his "centre of interests":-

"22. It may be noted that the opening words of art 13B require member states to lay down conditions for ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse. Germany is in my view entitled to consider that the other criteria suggested by Mrs Blasi, such as whether the accommodation is the centre of interests of the persons concerned or whether additional services are provided, would be too uncertain and difficult to apply. For example, a residential caravan on a camping site in Spain might be regarded as the centre of interests of a retired person who sells his house and goes to live there throughout the year; it would be difficult for the camping site owner to apply such a criterion. Moreover, the level of services and facilities provided by hotels, hostels and camping sites varies considerably. There are hotels which offer no more than a room and camping sites which provide little more than a camping field. Moreover, the German government might reasonably consider that such criteria would be less likely than one based on the period of stay to achieve the aim of competitive neutrality."

"since their purpose is to ensure that the provision of temporary accommodation similar to, and hence in potential competition with, that provided in the hotel sector is subject to tax." (paragraph 18)

28. It has to be noted, however, that the discretion conferred on member states by article 13B(b)(1) is more limited than that conferred by the tailpiece member state option.
29. The European Court agreed with Advocate General Jacobs that the provision in German law in question was compatible with Community law:-

"21. In defining the classes of provision of accommodation which are to be taxed by derogation from the exemption for the leasing or letting of immovable property, in accordance with art 13B(b)(1) of the Sixth Directive, the member states enjoy a margin of discretion. That discretion is circumscribed by the purpose of the derogation, which, in regard to making dwelling accommodation available, is that the – taxable – provision of accommodation in the hotel sector or in sectors with a similar function must be distinguished from the exempted transactions of leasing and letting of immovable property.

22. It is consequently a matter for the member states, when transposing art 13B(b)(1) of the Sixth Directive, to introduce those criteria which seem to them appropriate in order to draw that distinction.

23. Where accommodation in the hotel sector (as a taxable transaction) is distinguished from the letting of dwelling accommodation (as an exempted transaction) on the basis of its duration, that constitutes an appropriate criterion of distinction, since one of the ways in which hotel accommodation specifically differs from the letting of dwelling accommodation is the duration of the stay. In general, a stay in a hotel tends to be rather short and that in a rented flat fairly long.

24. In this connection, as the Advocate General (Jacobs) has stated at para 20 of his opinion, the use of the criterion of the provision of short-term accommodation, being defined as less than six months, appears to be a reasonable means by which to ensure that the transactions of taxable persons whose business is similar to the essential function performed by a hotel, namely the provision of temporary accommodation on a commercial basis, are subject to tax."

30. Mr Cordara submits that paragraph 21 from the judgment of the European Court is applicable to the tailpiece member state option. In my judgment, it is clearly applicable only to the discretion conferred by article 13B(b)(1). The passage cited above is also important because the test which the European Court applied to test the legitimacy of the exclusion from the exemption chosen by Germany was that it appeared to be a reasonable one to have made for the purpose for which the discretion in article 13B(b)(1) was conferred. I do not, therefore, consider that the Blasi case assists Mr Cordara's argument.
31. In the Far case, the question which the European Court had to consider was whether it was compatible with the Sixth Directive for Spanish law to subject to VAT all lettings, but then to exempt lettings of property let exclusively for dwellings. The argument turned on the form of Spanish legislation which was not expressed to be an exclusion from the exemption for letting. In his opinion, Advocate General La Pergola emphasised that the question whether an exemption should be restricted was essentially for the member state and that the Sixth Directive gave a wide margin of discretion to member states in assessing their economic situation. He added that the power was not unlimited. If it were unlimited, that would make the scope of the exemption "derisive". The Advocate General applied the court's decision in Blasi.
32. The European Court did not, however, advert to any limitation on the discretion in the member state option. It held that the Spanish legislation was compatible with the Directive:-

"13. Furthermore, it is clear from the actual words of arts 13B(b) and 13C of the Sixth Directive that the latter has left the member states wide discretion as to whether the transactions concerned are to be exempt or taxed.

14. It is therefore immaterial that a member state which considers it appropriate to subject to VAT all lettings of immovable property to be used otherwise than for dwelling purposes achieves this result by means of a general rule which subjects all lettings of immovable property to VAT and which exempts only lettings of immovable property for dwelling purposes or arrives at that same result by means of exceptions to a general rule exempting lettings of immovable property.

15. The answer to be given to the first question must therefore be that art 13B(b) of the Sixth Directive allows member states, by means of a general rule, to subject to VAT lettings of immovable property and, by way of exception, to exempt only lettings of immovable property to be used for dwelling purposes."

33. There has been some discussion in these proceedings as to whether the reference to "the latter" in paragraph 13 of the judgment of the European Court is referring to article 13(C) or to the Sixth Directive as a whole. This was a matter pressed before the judge but not before us. The judge took the view that the reference was to the Sixth Directive as a whole and I agree with him. This is the natural reading of the paragraph in the light of the questions under consideration. Accordingly, not only did the European Court not formulate any limits on the exercise of the discretion conferred by the tailpiece member state option but it also stressed the breadth of the discretion.
34. Mr Cordara has an alternative argument on discrimination. He submits that an unjustifiable distinction is drawn between the letting of seasonal pitches on the one hand and long stays in hotels, and the letting of cottages as second homes on the other hand. He submits that the limitation of the exemption to seasonal pitches could exclude not simply caravans used as holiday homes but also caravans used for the storage of goods. It was a blunt instrument. The exclusion of the exemption fell outside the genus of exclusions provided for in article 13B(b). He submits that the Far case is distinguishable because the whole class of business lettings would be excluded. On the eiusdem generis argument, it seems to me that Advocate General Darmon must be correct in saying that there is no genus in article 13B(b)(1), and that accordingly that canon of construction cannot apply.
35. Mr Cordara also submits that the policy behind the various provisions of VATA with respect to the letting of property is not obvious. In the case of buildings, the test whether the accommodation is used for holiday or hotel purposes is adopted. In the case of caravans, a test of seasonality is applied.

Conclusions

36. In my judgment, the European Court of Justice in the Henriksen, Lubbock Fine, Blasi and Far cases has not itself enunciated any limits on the tailpiece member state option in article 13B(b). On the contrary, the European Court has emphasised that the option is a wide one. I would, however, accept that there are some peripheral limits on the exercise of the option as a matter of the interpretation of the Sixth Directive. Those limits include a restriction that, while a member state is not bound to exercise the tailpiece member state option, if it decides to do so, the member state's policy objective must be consistent with the rationale of the lettings exemption as explained in the explanatory memorandum to the proposal for the Sixth Directive and by Advocate General Jacobs in the Blasi case.  There may be other limitations arising from the general principles of the Sixth Directive: see for example the Lubbock Fine case. However, it is not suggested that there is any such general principle applicable in the present case.
37. As to the manner of applying the exclusion from the exemption, a large measure of discretion is to be given to the member state. The test chosen by VATA in the case of caravan pitches is the test of seasonality. According to the statement of the minister responsible (Mr Peter Lilley) during the committee stage of the Finance Bill 1989 when seasonal pitches were first excluded by the United Kingdom from the lettings exemption, the purpose of the exclusion was to put seasonal caravan sites on all fours with holiday accommodation (Hansard, Standing Committee G, 16 May 1989, col.2). In the Blasi case the European Court applied the test of reasonableness to the decision of the German government to impose temporality as the test for exempting non-hotel type accommodation. In my judgment, this court should apply the same approach. Its jurisdiction is, therefore, supervisory. It is not appropriate for the court to investigate the matter of its own accord or to express its own view on how the exclusion from the exemption might have been framed. Mr Cordara submits that there are anomalies in the exclusion from exemption of seasonal pitches. He points out that the purchase of static caravans is zero-rated, but this may be because they are not immovable property.  Mr Cordara submits that the letting of caravans on seasonal pitches is not structurally suited to VAT. He submits that the exclusion of the letting of seasonal pitches would apply even if the "no sleep" provision was only for one night. It would also apply to caravans used for the storage of goods. However, as I see it, those examples are likely to be exceptional. Moreover, it would self-evidently be difficult for an owner of a camping site to discern whether or not a seasonal pitch was to be used simply as a person's dwelling. In those circumstances, I would accept that the test of seasonality in the case of static caravan licences meets the test of reasonableness: it seems to me to be a reasonable way of identifying caravan sites which are let for holiday purposes, that is, not for dwelling purposes. The exclusion of such property from the lettings exemption is consistent with the rationale of the exemption.
38. In the Far case, the Spanish legislation effectively excluded from the exemption all lettings of immovable property where the property was not to be used exclusively for dwelling purposes.  As I have said, the objective of the exclusion of seasonal pitches in the present case is to exclude lettings for non-dwelling purposes, and in my judgment, this is consistent with the rationale of the lettings exemption. I do not consider that the European Court would have concluded that, if the Spanish legislation had only excluded from the exemption some lettings for purposes other than purely for use as a dwelling, but not others, it would have been incompatible with the tailpiece member state option. The jurisprudence of the European Court emphasises the breadth of the tailpiece member state option. It follows that the exclusion of the letting of seasonal pitches for caravans, which are unlikely to be occupied on such pitches as a person's main residence and indeed in the present case are not permitted by the licensor to be so occupied, is not incompatible with the Sixth Directive. The peripheral limits on the tailpiece member state option set out above are thus satisfied in this case.
39. I then turn to the argument that VATA improperly discriminates between different types of lettings for dwellings purposes. As I see it, a member state is entitled to have regard to its own economic conditions, and to take into account the differences between different sorts of immovable property. Mr Cordara does not suggest that what the United Kingdom has done is necessarily discriminatory when the economic conditions or conditions affecting different immovable property are examined. However, he submits that seasonal pitches for caravans should be exempt if the licensee lives in a caravan there for more than twenty-eight days so that the exemption would be on a par with long stays in a hotel. I can leave on one side Mr Anderson's argument that paragraph 9 of schedule 6 is not comparable because it was the subject of a derogation under article 27. The economic conditions affecting caravans and hotels are not the same. Long stays in hotels are unusual for tourists. The more usual type of long-stay guest is a homeless person or immigrant. They will be using a hotel as their home. So there are differences between long-term stays in hotels and seasonal pitches. The conditions suitable for differentiating different categories of hotel accommodation may not be appropriate to other lettings of immovable property. They cannot simply be "read across".
40. Mr Cordara makes the point that there is no similar exclusion from the exemption for cottages let on the same basis. However, although there was a "no sleep" provision in the Ashworth case, such a situation is probably unusual in the case of cottages. Moreover, if the cottage is let on the basis that it is for holiday or leisure use it will in any event be caught by the exclusion for holiday accommodation. There has to be a separate provision relating to seasonal pitches because as the judge pointed out, seasonal pitches, being only slabs of concrete, are probably not themselves accommodation.
41. In reply, Mr Cordara developed an argument based on proportionality. He submitted that the exclusion of the exemption in relation to seasonal pitches was disproportionate. It would have been sufficient to exclude from the exemption sites not used by caravans occupied on a non-residential basis. He submitted that to be proportionate the exclusion from the exemption had to be formulated in the way least burdensome to the persons affected by it. In support of this submission he referred C R Smith Glaziers v Commissioners of Customs & Excise [2003] STC 419 at paragraph 25 per Lord Hoffmann (with whom Lord Woolf, Lord Hope and Lord Walker agreed):-

"(25) The Advocate General did not enlarge upon what kind of conditions might be regarded as appropriate for this purpose. But in general European law would require them to satisfy the principle of proportionality in its broad sense, which, following German law, is divided into three sub-principles: first, a measure must be suitable for the purpose for which the power has been conferred; secondly, it must be necessary in the sense that the purpose could not have been achieved by some other means less burdensome to the persons affected and thirdly, it must be proportionate in the narrower sense, that is, the burdens imposed by the exercise of the power must not be disproportionate to the object to be achieved. In the particular instance of conditions for allowing a VAT exemption, the Court of Justice of the European Communities has recently said that such conditions must be 'necessary for the attainment of the specific objective which [the legislation] pursues and have the least possible effect on the objectives and principles of the Sixth Directive' (see Ampafrance SA v Directeur des Services Fiscaux de Maine-et-Loire, Sanofi Synthelabo v Directeur des Services Fiscaux du Val-de-Marne (Joined cases C-177/99 and C-181/99 [2000] ECR I-7013, para 60)."

42. The provision under consideration in the Smith Glaziers case was a measure which restricted a taxpayer from availing himself of an exemption. It was, therefore, a very different provision from a provision which restricts an exemption. I have already held that under the tailpiece member state option member states have a margin of discretion in considering whether to restrict an exemption and also as to the respects in which the restriction should be achieved. In my judgment, once the United Kingdom decided to exclude seasonal pitches from the lettings exemption it was not bound to do so in the way least burdensome to the taxpayer. That would be inconsistent with the wide discretion conferred on the member state. In this respect the Sixth Directive gives greater value to the discretion of member state than to the interests of the individual taxpayer. Having, however, made its decision to restrict the exemption in a particular way, the member state must not impose the restriction in a disproportionate way. For example, in my judgment, it could not make the availability of the exemption dependent on producing a licence agreement executed in some particular way.
43. The principles of Community law applicable in this case, and necessary for the court's decision, are not in doubt. Accordingly, I do not consider that a reference should be made to the European Court.
44. For these reasons, I would dismiss this appeal.

Lord Justice Neuberger :

45. I agree.

Lord Justice Thorpe :

46. I also agree.