United Kingdom VAT & Duties Tribunals Decisions

VAT EXEMPT SUPPLIES - grant of rights over land - whether agreement granted facilities for parking vehicles - terms of the agreement, nature of the land, use of the land and circumstances of the grant considered - exception to exemption held inapplicable - assessment to VAT held to be incorrect - appeal allowed

MANCHESTER TRIBUNAL CENTRE

KEVIN T ROUTLEDGE  Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr M S Johnson (Chairman)

Sitting in public in Birmingham on the 27th October 2003

Mr P Clare, FFA, for the Appellant

Miss S Williams, counsel instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION

1. This is an appeal against one element of an assessment for £11,024.00 value added tax, plus interest, issued allegedly to the best judgment of the Commissioners of Customs and Excise ("Customs") and notified to the appellant on 30 January 2002. The issue in the appeal relates to the proper treatment for value added tax of "rent" received under an arrangement ("the arrangement") entered into between the appellant, trading as Leicester Basketball Club ("LBC") on the one hand, and Leicester Football Club ("LFC") on the other hand.
2. The appellant asserts that the arrangement amounted to the grant of an interest in or rights over land or of a licence to occupy land and was accordingly exempt from value added tax – see schedule 9, Part II, group 1, Item no 1 in the Value Added Tax Act 1994 ("the Act"). Customs agree that schedule 9, Part II, group 1 of the Act would be applicable to the arrangement, but for the exception at Item no 1(h), viz that the arrangement amounted to "the grant of facilities for parking a vehicle", making the supplies under the arrangement non-exempt. Customs assert that the grant is properly categorized as falling within exception (h).
3. The stated ground of appeal in the Notice of Appeal is that "tax is not due on the rent from the lease of land". The "rent" paid for the arrangement in respect of which value added tax is said not to be due but which has been assessed amounts to some £9,000, plus interest, forming part of the assessment for £11,024.00. That is the amount in dispute in this appeal.
4. The tribunal heard oral evidence from two witnesses. The appellant himself gave evidence in support of his case. He was examined in chief by his representative, Mr Clare, and cross-examined by Miss Williams, counsel appearing for Customs. In support of Customs' case, the tribunal also heard from Mrs D Garner, an officer of Customs who had visited the site on 10 August 1998. She was examined in chief by Miss Williams but not cross-examined.
5. The tribunal additionally had the benefit of the following documentation:

a bundle of documents, containing copies of the Notice of Appeal, Customs' Statement of Case, and other documents relevant to the appeal, paginated from 1 to 132, collated and handed in by Customs;

a sketch map of the site;

an aerial photograph of the vicinity; and

copies of the following authorities relied upon by Miss Williams, namely C & E Comrs v Trinity Factoring Services Ltd [1994] Simon's Tax Cases 504 ("the Trinity case"); and C & E Comrs v Venuebest Ltd – consisting of a copy of the transcript of the judgment of Morritt V-C dated 5 December 2002 ("the Venuebest case") ^[1].

6. I find the following facts.
7. The appellant leased from Leicester City Council ("the LCC"), for use for basketball purposes only, the land and buildings formerly known as "the Granby Halls". Part of the land leased comprised the land in dispute ("the disputed land"). That land was adjacent to the football ground occupied by the LFC. The appellant traded at the property leased to him, under the style of the LBC.
8. In August 1997, the LBC and the LFC reached an agreement ("the agreement") for the use of the disputed land. Under the terms of the agreement, the LBC and the LFC would each have rights to use the disputed land. An unsigned and undated copy of the agreement is at pages 131-2 of the tribunal bundle. The agreement was prepared without the benefit of legal advice, and although competently drafted, was manifestly not the work of a lawyer. Clause 1.0 of the agreement describes the disputed land as "the Granby Halls Car Park", clause 5.0(i) refers to the car park being made available by the LFC to the LBC on certain occasions, clause 5.0(iii) refers to the "commercial exploitation of the car park" by the LFC, and in clause 6.0, reference is made to the LBC and the LFC together ensuring "a smooth and efficient operation of the car park".
9. I was told in evidence by the appellant, and I find, that the expression "car park" used in the agreement was merely descriptive of the location of the disputed land, and did not describe its function. In that connection, I understand from the appellant, and I find, that when the land and buildings leased to the appellant were known as "the Granby Halls", in days before they were leased for basketball purposes, the disputed land was known as "the Granby Halls Car Park". Bearing in mind that the agreement had no plan attached to it, and that there was no other means of identifying the property to which it related other than by verbal description, it was natural that the parties to the agreement should use the label by which the disputed land had previously been known to identify it. I find that that is what they did.
10. The duration of the agreement was 12 months from 13 September 1997 to 12 September 1998. It granted the LFC a licence to make use of the disputed land for a "fee" of £1,800 per month. It provided for the LFC to have the use of the disputed land for most of the time, but with exceptions during periods defined on an attached schedule, when the LBC would have the use of the disputed land. There was no copy of the schedule before the tribunal. After the initial 12 months, the agreement was twice renewed between the parties, and so lasted until Summer 2000.
11. The agreement came about with the encouragement of the LCC. The LCC was keen that the LFC should have control of the disputed land during match days, to provide improved access to the football ground and for health and safety reasons. The LCC therefore induced the LFC to speak to the appellant to negotiate rights over the disputed land. I find that this negotiation had nothing to do with parking. It had to do with relieving the pressure, present at football grounds, on the existing entrances and exits to the LFC ground. The appellant described to the tribunal, and drew on the sketch plan, the entrances to the ground via the disputed land through which matchgoers could pour on entering and leaving the ground, taking advantage of the arrangement.
12. The disputed land further allowed a means whereby service vehicles (ambulances, fire engines, police cars, etc) could be got close to the ground on that side of it. It provided a natural location for placing TV "cranes" for recording and transmitting matches. It was not intended as a car park – matchgoers would park their vehicles either in nearby designated car parks, or on the public highway, or come to the match on foot or by public transport. I find that to have parked vehicles on the disputed land during matches would have defeated the object of having the arrangement, which was to leave the disputed land free from obstruction by vehicles so that pedestrians and emergency services could have ready access to the ground via the disputed land.
13. In a nutshell, the arrangement was entered into to provide the LFC with control of the disputed land in the interests of its spectators.
14. The disputed land was not laid out as a car park. In size it was some 110 metres long by 25 - 30 metres wide. It had a rough concreted surface, poorly maintained. It was accessible from the public highway at both ends. Neither the LBC nor the LFC designated it as a car park. The appellant and Mrs Garner agreed that a handful of cars might in practice sometimes be parked on it by people having business at the football ground, such as traders or match officials, but I find that that use of the disputed land was such as to be de minimis.
15. The appellant told the tribunal that quite often strangers would park on the land on non-match days, taking advantage of the disputed land's nature as an open area, and the fact that it was not fenced off from the highway. The disputed land's location about a mile and half from the City Centre made this attractive to town goers. I find that these parkers left their vehicles without permission, and were technically trespassers. They were not charged for parking; rather they were not turned off the disputed land because neither the LFC nor the LBC had at the particular moment any other use for the disputed land. Such unauthorized use was spasmodic – often the land stood vacant.
16. I find that for many years prior to the agreement, from the 1970s onwards, the disputed land had not been utilized as a car park. The disputed land was not leased by the LCC to the appellant on the basis that it might be so used. Any such use would be an infringement of the user covenant of the appellant's lease. It follows that, unless the LCC granted permission, which there is no evidence that it ever did, the appellant could not lawfully allow the LFC to use the disputed land for that purpose. What the LCC did contemplate, in encouraging the arrangement, was the use of the disputed land by the LFC for the purposes above described. Those purposes did not include parking.
17. Appearing for Customs, Miss Williams submitted that it was necessarily to be implied that the appellant had granted to the LFC facilities for parking vehicles. Referring to the Trinity case, at [1994] STC 508 c – f, she drew attention to the nature of the disputed land. There was nothing, she submitted, to preclude the LFC from using the disputed land for its implied use, namely parking. She quoted from the opinion of the court at page 508 f, viz:

"The proper question [for the tribunal] is whether having regard to the nature of the subjects and the terms of the lease a grant of facilities for parking a vehicle has been made either expressly or by necessary implication".

18. Miss Williams also referred to the Venuebest case. Customs in that case submitted that the nature of the supply of the land was to be ascertained from all the facts and circumstances of the case. As well as to the Trinity case, reference was made in the Venuebest case to the decisions of the European Court of Justice in Svenska Staten v Stockholm Lindopark AV [2001] 1 ECR 493 ("the Svenska case") and in Slatte Ministariat v Henrikson [1990] STC 768 ("the Henrikson case"). At paragraph 26 of the judgment in the Svenska case, the court pointed out that:

"According to the case law of the [European] Court of Justice, in order to determine the nature of a tactical transaction, regard must be had to all the circumstances in which the transaction in question takes place in order to identify its characteristic features".

19. In the Venuebest case, the tribunal deciding the issue was referred neither to the Trinity case nor to the Svenska case. The tribunal was referred to the Henrikson case, but did not refer to that case in its reasoning. On appeal in the Venuebest case, the court found that the tribunal had erred in two different ways. Firstly, the implication to be derived from the nature of the land was not considered, notwithstanding the Trinity and Henrikson cases. Secondly, contrary to the Trinity case, the tribunal, rather than looking to see whether car parking was prohibited or allowed in the lease of the land, looked to see whether there was in the lease a stipulation limiting the use to that purpose.
20. Miss Williams invited the tribunal to construe the agreement as amounting to the grant of facilities for parking. She referred to the repeated use of the words "car park" in the agreement, reflecting what the land in reality was, namely a car park. She submitted that the absence of a prohibition on car parking in the agreement supported Customs' case that the arrangement was within exception (h) in Item no 1. It was irrelevant that the disputed land was not laid out as a car park, seeing that it was suitable for parking.
21. For the appellant, Mr Clare submitted that the arrangement was no more the grant of facilities for parking vehicles than if the disputed land were a field or other piece of undeveloped land. He pointed to the absence of any evidence that the disputed land had, at least for many years, been a car park. He submitted that Customs had assumed, and assumed wrongly, that the disputed land must have been a car park because of its description as such in the agreement.
22. Mr Clare pointed out that the disputed land had not been used by the LFC as a car park. The reasons for entering into the arrangement, at the instance of the LCC, had been entirely different. He explained the references to "car park" in the agreement as a matter of "sloppy drafting". On reflection, the wording was not ideal. However the references to "car park" were innocent, and were not intended to convey that the parties regarded the disputed land as a car park.
23. I have carefully considered the Venuebest, Svenska, Trinity and Henrikson cases in the light of the facts found by me in the present case, and my conclusion is that, notwithstanding the name given to the disputed land in the agreement, the LFC was not granted facilities for parking vehicles.
24. Undeniably, the disputed land was once a car park, which was how it became known as such. But the law is not, "once a car park, always a car park". Changes in the use of land happen, and such changes had happened in this case.
25. I have found that the disputed land was not leased by the LCC to the appellant for any purpose other than basketball. The lease was restricted to that use. That was a change from the historic use of the disputed land for parking. Had the appellant sought to use the disputed land for parking, the LCC could have objected.
26. When the appellant proceeded to enter into the agreement, with the approval of the LCC, the agreement was not for parking but for other uses. There is no evidence before the tribunal that those other uses included parking. The disputed land was not a vehicle park under the control of the LBC, and it did not become a vehicle park under the control of the LFC.
27. The nature of the land was not, by the date of the agreement, that of a car park. I agree with Mr Clare that that was an assumption that Customs made. This tribunal has heard no reason underlying that assumption other than the description contained in the agreement and the fact that, undoubtedly, one could park vehicles on the land. Those matters alone are not enough to characterize the grant as one of facilities for parking vehicles, when the full circumstances of the grant are taken into account, as the Svenska case requires.
28. Before formulating the assessment under appeal in this case, those circumstances should have been, but were not, considered by Customs. The correspondence in the tribunal bundle shows that the existence of such circumstances was made known to Customs by the appellant's representative. Accordingly it was in my view unreasonable of Customs to proceed to have issued the assessment without regard thereto.
29. Having regard to those circumstances, the question that the tribunal has to decide, as held in the Trinity case is: has a grant of facilities for parking vehicles been made, either expressly or by necessary implication? The findings of fact that I have made yield, in my view, only one answer to that question, which is "no".
30. It follows that the grant in this case is not within paragraph (h) in Item no 1, so that the exception to exemption does not apply. This appeal is therefore allowed. The tribunal directs that the assessment under appeal is to be reduced to exclude the amount in dispute, namely the sum attributable to the exempt supplies.
31. The appeal may be restored for further hearing if desired, limited however to matters relating to the final quantification of the assessment and to costs. On the question of costs, it may help for me to indicate that, without having heard argument, I provisionally incline to the view that Customs should pay the appellant his reasonable costs of the appeal, to be summarily assessed by the tribunal in default of agreement.

M S JOHNSON

CHAIRMAN

RELEASE DATE:

MAN/03/0099

Note 1       (now reported at [2003] STC 433).    [Back]