First-tier Tribunal (Tax)

[2011] UKFTT 190 (TC)

TC01059

Appeal reference: TC/2010/05146

VAT – construction of skate park by registered charity – is the skate park a building – no – group 5 schedule 8 VAT Act 1994 – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

WHEELED SPORTS 4 HEREFORD LTD Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMS Respondents

Tribunal: Lady Mitting (Judge)

John Lapthorne FCMA (Member)

Sitting in public in Birmingham on 28 February 2011

Brian Stephens, trustee and treasurer, for the Appellant

Miss L. Wilson-Barnes, counsel, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.           The decision under appeal is that of the Respondents contained in a letter dated 17 February 2010 that the construction by the Appellant of a skate park for wheeled sports users should be standard-rated.

2.           The Appellant is a registered charity and a company limited by guarantee, set up for the sole purpose of undertaking a building project relating to the construction of a skate park.  The case for the Appellant was put by its treasurer and one of its trustees, Mr. Brian Stephens.

3.           Item 2(a), group 5, schedule 8 VAT Act 1994 zero-rates “the supply in the course of construction of a building designed as a dwelling or number of dwellings or intended solely for a relevant residential purpose or a relevant charitable purpose”.  It was not argued before us that the construction of the skate park was not for a relevant charitable purpose, and the sole issue with which we were concerned was whether the skate park was a building.

4.           The charity was set up in 2004, its aim and objective being stated to “provide or assist in the provision of a safe, purpose-built, free, accessible outdoor facility for skateboarding, rollerskating and cycling in Hereford for young people with the object of improving their conditions of life”.  The skate park which is currently in the course of construction will eventually consist of four phases, phases one and two of which have already been completed and are in use.  The area of the skate park is some 1,500 square meters and is being built on the site of an existing car park.  The site is let to the Appellant by the local authority for a minimal rent.  The facility is constructed from concrete.  It contains three bowls of varying sizes which are sunk to depths of up to four feet.  The walls and banking rise above ground level to a height of some five feet.  The facility is totally open-air, is open to all comers 24 hours a day, 365 days a year and is used free of charge.  This is a youth-led project with around 700 youngsters directly involved, everyone working on a voluntary basis and there are no paid staff.  It is totally a private initiative and all monies raised to fund the project have been through grants and donations.

5.           The use of the facility is for skateboarding, inline rollerblading and BMXing.  The users are often disengaged from mainstream sport and probably do not regard what they are doing as sport in the conventional sense.  Available figures show that the footfall at the skate park since it opened at the beginning of 2009 has been around 20,000.  Users come not only from Hereford and its surrounding areas but from much further afield and when complete the facility will be among the three biggest skate parks in the UK.  The facility enables youngsters to develop their confidence, their skills and their fitness in a totally safe environment and as part of a community.  It is of particular benefit to the more disadvantaged young people who do not find it easy to be accepted into the broader society.  The fact that it is free to use and can be accessed at all times makes it particularly attractive to those living in poverty.

6.           It was the submission of Miss Wilson-Barnes that what the Appellant had constructed was not “a building”.  Mr. Stephens did not really deviate from this view but contended that the Respondents’ ruling appeared discriminatory and arbitrary.  To him it made no sense that the skate park, if it had a roof, could have been zero-rated.  He highlighted a neighbouring charity which catered for riding for the disabled.  This organisation operated out of a covered arena which had been treated as zero-rated.

7.           We should say at the outset that we were both enormously impressed with Mr. Stephens’ passionate presentation of the work of his charity and the facility that it has built is admirable and impressive.  However, as Mr. Stephens himself readily acknowledged, the role of the tribunal has to be to examine the construction of the skate park in the light of the precise wording of the statute.  The legislation is narrowly drawn and to benefit from zero-rating, what has been constructed has to be a building.

8.           The word “building” is not defined in the statute and various tribunals have taken different approaches, but certain common threads can be drawn.  The New Oxford Dictionary definition of a building contains the word “a structure with a roof and walls…”.  The Shorter Oxford Dictionary includes “a permanent fixed thing built for occupation”.  Tribunals have highlighted the sense of enclosure which would come with a building.  Again, merely because a structure is built, it does not mean that the result is a building - for example a wall or a ship.

9.           The skate park has clearly been built and is clearly a permanent structure.  It is capable of being occupied in the sense of being used but beyond this in no sense can it be viewed as a building.  There is no sense of enclosure, having neither walls nor roof.  Further, although not in any way definitively, it is not a structure which anyone looking at it and attempting to describe it would term a building.

10.        We therefore have to find that the skate park constructed by the Appellant is not a building and its construction does not attract zero-rating.

11.        It is with great sympathy for the Appellant that we reach this conclusion.  We do not think that our view will come as any great surprise to Mr. Stephens but the financial implications to the charity are enormous.  Mr. Stephens’ estimate was that by the time the project is complete, VAT of some £90,000 will have had to have been paid.  This is a vast sum to be paid out of funds donated by the general public for a recreational facility.  We understand from Mr. Stephens that the local MP is interested in taking the matter further and we can really only say that in the light of the development in the range and diversity of modern day charitable undertakings some consideration should perhaps be given to the VAT treatment of capital projects which these charities are undertaking which clearly fall within their charitable objectives but do not conform to the current legislation.

12.        The appeal is dismissed.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

LADY MITTING

JUDGE
Release Date: 17 March 2011