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Cirdan Sailing Trust v Customs And Excise [2004] UKVAT V18865 (8 December 2004)

18865

Zero-rating – Transport – Transport of passengers – Appellant charters out manned yachts to schools and organizations for the welfare of young people – Whether Appellant's supply is properly characterized as "transport of passengers … in any … ship" – Yes – Whether a supply of exempt sporting facilities or education – No – VAT Act 1994 Sch 8 Gp 8 Item 4(a)

Zero-rating – Transport – Repair or maintenance of qualifying ship – Appellant charters out manned yachts to schools and youth organizations – Whether yacht is a "qualifying ship" – Whether it is neither designed nor adapted for use for recreation or pleasure – Yes – VAT Act 1994 Sch 8 Gp 8 Item 1 and Note (A1)(a)

LONDON TRIBUNAL CENTRE

THE CIRDAN SAILING TRUST Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

PENNY JONAS

Sitting in public in London on 28 October and 9 to 11 November 2004

Eamon McNicholas, counsel, instructed by Jordans VAT Consultants Ltd, for the Appellant

Nicola Shaw instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

This appeal raises two issues:

(i) are the supplies by the Appellant Cirdan Sailing Trust ("Cirdan") properly to be characterized as zero-rated supplies of passenger transport and/or zero-rated supplies of a qualifying ship (as Cirdan contends) or as exempt supplies of sport and/or education (as the Commissioners contend) and

(ii) are the supplies of repair and maintenance to Cirdan properly to be characterized as zero-rated supplies, of repair and maintenance, to a qualifying ship (as Cirdan contends) or as standard rated supplies (as the Commissioners contend).

The first issue

This arises from a decision letter of 8 September 2003 in which the Commissioners determined that Cirdan's supplies were exempt supplies of sport or education. The decision was followed by assessments in respect of incorrectly claimed input tax.

The statutory provisions on "transport" are in VAT Act 1994 (VATA) Schedule 8 Group 8. Item 4(a), which is relevant to the first limb of the first issue, provides for the zero-rating of :

"Transport of passengers –

(a) In any vehicle, ship or aircraft designed or adapted to carry not less than ten passengers".

Item 1, which is relevant to the alternative limb of the first issue zero-rates "the supply of a qualifying ship" (as defined in Note A1 – a definition we will refer to when dealing with the second issue).

Item 1 of Group 6 to Schedule 9 of the VATA covers educational supplies and provides for the exemption of :

"The provision by an eligible body of –

(a) education;"

Item 3 of Group 10 to Schedule 9 of the VAT Act covers sporting facilities and provides for the exemption of:

"The supply by an eligible body to an individual, except, where the body operates a membership scheme, an individual who is not a member, of services closely linked with and essential to sport or physical education in which the individual is taking part".

Relevant to the first issue are the following questions. What is Cirdan and what activities does it carry on? To whom does Cirdan make its supplies? What is the nature of those supplies? We had an opportunity to view one of the vessels, a Thames barge called Xylonite while secured alongside in Maldon in Essex. We heard evidence from the following witnesses:

Brain C Sainsbury, the head teacher of St John's School in Essex

David Patient, shipwright and Maldon Harbour Commissioner and consultant to Cirdan

Charles Nicholas Back, chief executive of Cirdan

Rhona Clement who has been employed by Cirdan as a mate for the past two and a half years

Jonathan Hide, skipper, with Cirdan

Leonie Turner, head of marketing with Cirdan

Cirdan, a registered charity, was formed as a company limited by guarantee in July 2002 and it took over the assets of the Cirdan Sailing Trust and the Faramir Trust. Cirdan's "Objects", set out in its Memorandum of Association are-

"… to help educate young people through their leisure time activities so as to develop their mental physical and spiritual capacities by the provision of training and instruction in the art and craft of sailing and other leisure time activities so that they may grow to full maturity as individuals and members of society and so that their conditions of life may be improved."

Cirdan's headquarters are in Maldon in Essex. From there it operates four large sailing vessels. Each vessel has a paid crew consisting of a skipper, a mate and, in some cases, a second mate. It enters into (what it describes as) "charters" with organizations comprising groups of young people. During the sailing season Cirdan's vessels carry these "charter groups" on sea trips, starting and usually ending at UK Ports such as Maldon and Weymouth.

Cirdan derives its income from charter fees and from donations. The Cirdan's Sailing Trust's accounts for 2001 (i.e. before a corporation) comprised some £365,000 of fees and some £59,000 from donations. Reductions in fees, or "bursaries" (as Cirdan calls them), are made to enable charter groups to include children and young people who might not otherwise be able to afford to come.

Most of the charter groups are groups of young people drawn from youth organizations and schools. The great majority of the young people in the group are socially, physically or mentally disadvantaged. Each of those groups will include leaders and other support staff and the ratio of staff to young people reflects the level of disadvantage of the young people and is frequently one to three. Many of the young people who sail with Cirdan are part of governmental nationally recognized schemes such as "Entry to Employment", "U Projects" and the Prince's Trust and other clubs. Other charter groups come from special needs organizations, "outreach" groups, guides, scouts, and church groups, hostels and probation units.

Many of the charter groups are regulars. But Cirdan does some recruiting through targeted telephone sales and mailshots. In a typical year some 1,400 young people take part in the charter groups.

The contractual arrangements between Cirdan and the charter group

The potential charter group makes an application to Cirdan nominating a senior leader who will assume actual responsibility for the sailing trip. The application form stipulates the start and end dates (usually a Saturday and a Friday during the sailing season from April to the end of October). The applicant is required to pay a deposit. The applicant may, on paying £7.00 a head, elect for the charter group to work towards a RYA Competent Crew Qualification.

The actual agreement states the "full charter price" and any reduction in the amount payable to reflect a bursary given by Cirdan. The "Conditions" include the following:

"All members of the group are required TO ACT AS CREW DURING THE SAILING TRIP and to take a full part in ship board life.

The group is required to arrive at the time and place agreed, to prepare food for themselves and for the Cirdan Trust officers.

Subject to adverse weather or other conditions beyond their control, The Cirdan Trust agrees to have the vessel ready and available at an agreed place and time and to pay all harbour dues, light dues and fuel bills of the crews. It also agrees to provide qualified officers.

The Trust agrees to provide all required safety equipment including life jackets and safety harnesses, to be worn when required by Officers or by leaders. The trust does not provide heavy weather clothing.

The Trust assumes responsibility for members of the group only when afloat in a Cirdan Trust vessel or tender and holds insurance to cover injury or mishap only during these periods. Liability is however only accepted provided the Trust's reasonable orders are obeyed and group members behave in a reasonable manner. THE GROUP LEADER IS RESPONSIBLE FOR THE GROUP WHEN NOT ON BOARD. We strongly recommend that individuals take out their own travel insurance to cover periods off the vessel and medical needs."

We will revert to those conditions when we come to focus on the question whether Cirdan's supplies consist of the "transport of passengers" within Item 4(a) of Group 8. We mention at this stage that the website of the Association of Sail Training Organizations, of which Cirdan is a member, states of Cirdan that there is "no room for passengers".

Boats

There follows a brief description of the boats.

Xylonite is a Thames Sailing Barge. From 1926 until 1958 she carried goods and operated under sail. In 1984 she was bought by Cirdan and completely rebuilt. From then on she has been carrying charter groups of up to twelve individuals consisting of young people, their leaders and support staff. We visited Xylonite. Below deck there is a large saloon equipped with two domestic gas ovens and grills, a double sink with hot and cold running water and two fridge/freezers. There are three cabins allocated for the use of the charter groups with three, four and eight berths. There are three separate washrooms/toilets and a shower. The sailing staff, i.e. a skipper and a mate who are Cirdan employees, have separate accommodation. The barge is centrally heated throughout. Our impression of the accommodation in Xylonite is that it is limited to bare essentials. There are no concessions to comfort.

There is space on deck and opportunities for the young people in the charter groups to participate while Xylonite is sailing and while it is at anchor or alongside. The skipper and the mate are able to handle the boat in all conditions. But the young people are free to lend a hand pulling on and letting out ropes and steering, always under the eye of the skipper or the mate.

Queen Galadriel was built in Denmark in 1937 as a cargo vessel. In 1983 she was bought by Cirdan, restored and re-rigged as a gaff ketch. She operates out of Ipswich making trips along the east coast and across the North Sea to Holland and Belgium. During the summer months she operates out of Weymouth making trips to Channel ports in France and to the Channel Islands. She carries a charter group of up to seventeen individuals. Her full-time paid crew includes a skipper, a first mate and a second mate and sometimes a fourth hand (a volunteer). She has thirteen bunks and a further four in two self-contained "leaders" cabins. The galley and washing facilities are much the same as Xylonite's. Queen Galadriel's Small Commercial Vessel Certificate stipulates that twenty-one is the maximum number of persons that may be carried.

Hartlepool Renaissance, a Bermuda Ketch, was built in 1976 for the Ocean Youth Club sail training. She was used for sail training until she became part of the Cirdan fleet in 2001 and now takes charter groups of young people, their leaders and support staff, usually sailing in the north east and the Scottish coastal waters. She has a permanent staff complement of two professional seamen. She carries charter groups of up to twelve people. The Small Commercial Vessel Certificate provides for sixteen as the maximum number of persons to be carried.

Duet is a gaff rigged Edwardian Yawl built in 1912. She was a private yacht until 1960 and from then until 1996 she was used for sail training. Since then she has been used by Cirdan for charters to groups. The facilities are comparable to those in the other three boats. The sailing staff consist of a skipper and a mate. The total charter group may not, according to the brochure provided by Cirdan, exceed seven. The Small Commercial Vessel Certificate provides that a maximum number of nine persons may be carried. Mr C N Back, chief executive of Cirdan, explained that many more than nine could in fact be carried in Duet. For day trips there is sitting room for up to fourteen; and, he said, Cirdan proposes to apply for certification to carry more than ten people.

Regulatory requirements

All four boats are covered by the relevant Code of Practice published in pursuance of Merchant Shipping Regulations. This lays down, among other things, the minimum qualification of the person in charge and of the additional persons required to be carried. It imposes on the owner the responsibility for safe manning of the vessel and for keeping a safe navigational watch. These regulations do not apply to private non-commercial vessels. The same goes for certain Marine and Coastguard Authority regulations. These require boats used for commercial purposes (such as the present four boats) to have, for example, watertight bulk heads, bilge pumps in each compartment and fire fighting equipment.

The four boats are charged harbour dues at the rates applicable to vessels plying for hire.

Cirdan's headline publicity starts with these words:

"The Cirdan Sailing Trust gives your people the opportunity enough to transform their lives through the experience of living and working aboard large vessels. How? By taking an active role in – hoisting sails – climbing rigging – exploring new places – night watches – scrubbing decks – preparing meals – plotting courses – look out duty – navigating – steering the boat … and more. All this! Within a safe and challenging environment that encourages the development of life skills and stretches personal boundaries."

The publicity goes on to answer certain questions such as –

"Do I have to be a great sailor? No previous sailing experience is required. You will be under the instruction of highly qualified sailing staff, who are there to help, teach and encourage. It is possible, during a charter of five or more days, to gain the Royal Yachting Associations (RYA) Competent Crew Certificate.

The publicity goes on to explain – "Our work with young people":

"The Trust works principally with groups of young people, from ten years old, from youth organizations across the spectrum. We are particularly concerned to help those who are socially, mentally, and physically disadvantaged.

We aim to provide an opportunity for the group with their leaders to experience together the adventure and challenge of life at sea. Working alongside our crew, the group take an active role in running and sailing the vessel. It is through this involvement that the young people benefit and leaders use this to build on their work with the group."

So far we have looked at the relevant activity from Cirdan's angle. We turn now to the charter groups. Some independent physical ability is required of each individual. Wheel-chair bound young people are normally unable to embark on the boats and to move from deck to deck and so are not normally part of a charter group. Subject to that the charter groups will include young people with a wide range of disabilities and disadvantages such as autism, Fragile X syndrome, cerebral palsy, Downs Syndrome, epilepsy, ADD and emotional and other behavioural difficulties.

Brian Sainsbury, head teacher of St John's School in Essex, giving evidence, said he had been taking groups from his school for eight years. They all had disabilities of those sorts. The journey, he said, engenders a sense of purpose enabling the young people to discover and shape important aspects about their own characters. The preparation for the voyage started at the beginning of the term in which it was to take place. The group worked on diet and the design of a practical menu for the voyage. They looked at economical means of shopping and, the content of a kit list. They worked out routes from the school to the ports of embarkation. Those tasks have been given more purpose by a unit of study designed by the school and validated by the AQA examination board. Mr Sainsbury said that he did the examining.

The young people in Mr Sainsbury's group are also involved in recording a video diary.

Once on board, the young people in the charter group are encouraged by their leaders and support staff to carry out tasks such as washing and drying up, wiping tables, waiting on each other at table, sweeping and mopping, preparing vegetables, shopping and making drinks. Those are tasks which, Mr Sainsbury said, many of them had never had to do before and did not believe they were capable of. To encourage social interaction and use of free time the young people are encouraged by their leaders to play card games, draughts and chess, to keep diaries, to take part in sing-songs and to listen to and tell stories. Mr Sainsbury's view was that the experience of the whole outing strengthened the young people's qualities of patience and awareness of each other's difficulties, needs and strengths. He saw the discomforts and challenges of the journey as enabling the young people to grow and take pride in their achievements. The voyages, he said, presented the young people with the chance of visiting ports and countries that they would not usually have the opportunity to see.

When on deck, Mr Sainsbury said, they took every opportunity to see "unusual" things such as stars and the sunrise. The group leaders and support staff encourage the young people to participate in the ship life. While they did not usually have the strength to pull on a rope to hoist the sail, they were able to steer (or help with steering) and to scrub the decks. He wanted the young people to feel as if they were performing the role of the ship's crew. Below decks, they were encouraged to do as much as possible to prepare and serve meals which were wholly the responsibility of the charter groups.

The charter groups choose the destination of the voyage. But this is always subject to the overriding decision of the skipper. The leader and the support staff are responsible for their groups when the boat is in port. They, and not the actual paid crew, have to decide what the young people should do when ashore.

The role of the paid crew in relation to the charter groups

The skipper and mate have responsibility for the safety of all those in the charter group. When the group arrives their personal belonging are loaded on to the yacht. The skipper then introduces the safety brief; the mate takes over and gives the young people a deck brief. If the young people are willing and capable, they will be allowed to help with certain limited tasks, such as scrubbing, polishing and steering. Some things they are not allowed to do, such as dropping and raising anchor. The young people are divided into watches when the boat is on a voyage. This is to ensure that only a manageable number are on deck at night. They are required to wear harnesses and to clip themselves to safety lines when on deck. None of the young people in the charter group are compelled to do anything (other than to take precautions for their own safety such as clipping on and keeping away from the boom) either on deck or below. The only duties required of the group as a whole are to clear and clean their living spaces and to cook the meals. (Even cooking has been known to have been left to the paid crew.)

The paid crew are not trained in education, teaching or sport.

The voyages

Jonathan Hide, the skipper of the Queen Galadriel, said that Weymouth had been one usual port of embarkation for the Queen Galadriel. Everything then depended on the state of the weather. Normally they would set sail on the Saturday and make a night voyage to Cherbourg where the young people would spend the day resting and visiting the town. The evening will be spent back in the boat and the next day they will set sail for the Channel Islands. A visit to Sark will, according to Mr Sainsbury, show the young people an island free of traffic. The visit to Alderney, he said, will show them a place where the inhabitants felt free to leave their cars and house doors unlocked. In the evenings the charter group make their own entertainments. Usually they return to Weymouth; but about a third of the Queen Galadriel's voyages in 2004 had ended up in some other port. In summer months the voyage back to England will be in daylight.

The Xylonite's voyages are more or less within the Thames Estuary. Some passages around islands and smaller estuaries will take several hours. Night stops are usually at anchorages. The young people have the opportunity to row ashore, to polish the extensive brass work or to remain below in the mess deck. Usually the Xylonite works to a six-day trip always returning to Maldon.

We heard no specific evidence about the voyages of Duet and the Hartlepool Renaissance. Duet, we understand, operates usually from Ipswich and Hartlepool Renaissance from ports in the North East of England and Scotland.

The RYA Competent Crew Certificate

It will be recalled that the Application Form gives the organization chartering the vessel the opportunity to enter its young people, on payment of £7 a head, for the RYA Competent Crew Certificate. The evidence on what is required to earn a certificate was unclear. We understand that 10 per cent of all young people are entered for the certificate. Usually a whole group is entered and then only if the organization is sure that there will be no failures. The qualification requirement, we understand, is for the person in question to have been shown how to tie eight different knots and how to row a small boat. At the end of the voyage a presentation will be made, usually by the skipper.

Some testimonials

A student of St John's school writes:

"A trip to remember and I want to go again. There were scary times too with high winds … but it was all part of the excitement!"

A young person from Kettering area youth centre wrote:

"Sailing on the Queen Galadriel was a once in a life time experience. Working hard on deck was a very good way to break the ice and I made some good friends."

An organization, Ash Green Support Services, wrote:

"We are back from a trip that people here will still be talking about for months to come! At Ash Green we specialize in finding challenging activities for people, and the trip on Xylonite certainly fulfilled our criteria. It was a joy to hear some of our crew say "I never believed I could have done that". One man in particular repeated the phrase about nearly everything he did or was asked to undertake and it has developed his confidence and self-esteem no end. It was a privilege for me to be part of that and thank you for making it happen."

Another chartering organization, Northamptonshire Life Long Learning Service, wrote:

"The group that was chosen to go was picked, not only for their enthusiasm and eagerness, but also because they had never had the luxury of being able to taste the unique experience of sailing before. They did not disappoint as a crew and all got along famously in such small confines. A major reason for the good atmosphere was the great leadership from the Skipper and his first mate. They were welcoming, hospitable, very professional and great tutors."

The common ground

It is accepted that Xylonite, Hartlepool Renaissance and Queen Galadriel qualify as "ships … designed or adapted to carry not less than ten passengers": see item 4(a) in Group 8 of Schedule 8.

It is also accepted that Cirdan is an "eligible body" for purposes of the education and the sporting exemptions.

It is common ground that Cirdan's supplies constitute single supplies. The only point of dispute between the parties is as to the proper characterization of those supplies.

The rival contentions

The Commissioners say that the members of the charter group are not "passengers" for purposes of item 4(a). A passenger, they argue, is someone who travels in or on a vehicle or vessel who is not the driver, pilot or a member of the crew. Cirdan's publications, the Objects clause in its Memorandum and the testimonials from the charter groups show that the involvement of the young people as members of the crew is a key feature of the supplies Cirdan makes. In a real and substantial sense, the Commissioners say, the young people must be viewed as crew, i.e. as people who man or work aboard the particular boat.

Cirdan argue that the individuals in the charter groups are passengers. They come on to the boats with none of the responsibilities of the boats' crews; the boats' crews, by contrast, carry the legal and employment responsibilities to man the boats to the requisite levels of competence. As passengers, those individuals are transported from place to place. On that basis Cirdan's supplies qualify for zero-rating.

Regarding Duet, the Commissioners say that Cirdan's supplies making use of it cannot on any basis qualify for zero-rating; it cannot lawfully carry more than seven passengers (plus two crews). That is not the right approach, argued Mr McNicholas for Cirdan; the Tribunal should form a reasonable view of Duet's carrying capacity and, in the light of Mr Back's evidence that Duet has sitting spaces for up to fourteen, it should be regarded as "designed or adapted to carry not less than ten passengers".

The Commissioners then say that Cirdan's supplies are of sport (i.e. sailing) and education (i.e. instruction in how to sail and about life on board). Those, they say, are the dominant elements of the supplies in question. Insofar as there is a transportation element in Cirdan's supplies that is not the dominant element; it is, say the Commissioners, ancillary to the sporting element, as being the means of providing the young people with the opportunity of sailing the ships and participating in their running, acting and experiencing life as crew.

Conclusions on first issue

The evidence satisfies us that neither the individual young people nor the charter groups of which they form part are members of the crew of any of the four boats. Aside from being collectively responsible for bringing food with them for the trip, providing the meals and keeping their mess deck clean and tidy, they have no crew-like features. A member of a crew of a boat has, we think, a specific role, performing a function in relation to the running of that boat; and he has the responsibility to perform it.

Here none of the young people has any duty to perform in relation to the running of the boat in question. Each of them is encouraged to participate in those of the on-board activities that fall within their competencies and can safely be carried out by them. But, as individuals, they have no duties to the boat or to the others being carried in it. They are under no compulsion to do anything other than comply with the safety requirements imposed by the skipper, such as to keep clipped on when on deck and to keep clear of the booms and the anchor winch and chain when those are being worked by the mate.

The reality is that the young people are on the boat for (to use the words of Mr Sainsbury) "a sailing adventure" during which "the experience of sailing and the need to work together, regardless of the weather, or how tired you may feel, maximizes the chance for people to grow and take pride in their achievements." Cirdan for its part has the obligation under the charter agreement with the organization to provide the organization with a floating stage on which the young people will "act as crew during the sailing trip". Cirdan does this in the course of its business and its charitable object of "helping" young people to develop their mental, physical and spiritual capacities; Cirdan provides the means by which "training and instruction in the art or craft of sailing" is offered by the chartering organization, its leaders and support staff.

On that basis the young people cannot properly be described as "crew": so are they passengers being transported? Without the aid of any authority we would say

that they are. They are being provided with berths in boats and the services of professional crews to enable them to go on voyages from the ports of embarkation to other destinations and (usually though not always) returning at the end of the charter periods to the original ports of embarkation. That seems to us to rank as a "transport of passengers" within item 4(a). We say that with the words of the Association of Sailing Training Organization website message – "… there is no room for passengers …" – mind. Those words connote to use more an expectation that the young people will participate than a fact that they are not passengers.

The Commissioners place reliance on the "Big Dipper" decision of Lord Widgery CJ. That is Customs and Excise Commissioners v Blackpool Pleasure Beach Co [1974] STC 138. The owners of the Big Dipper had claimed zero-rating for their provision of rides on their specially constructed half a mile track along which a vehicle known as a "coaster train" ran. The Court of Appeal rejected this and the consequence was that the supplies were standard rated. As both sides have placed emphasis on the extemporary decision, we set out the passage from 140j-141c in full:

"In my view the essence of transport of passengers is the carriage of a passenger from A to B, and perhaps from B to C. I am fully conscious of the fact that there are such things as return tickets and round trips, and that a person setting out to go from A to B may nevertheless retrace his steps or continue his journey in such a way as to end up in the end at A again. But the essence, as I see it, of transport of passengers is that the passenger is taken from A to B because he wants to be at B or because there is some purpose in being at B, and if he then goes on from B to C his carriage may still be the transport of a passenger because he wants to be at C and so on. I cannot accept that a person who in effect remains on one spot all the time is on any view to be considered under the head of being transported as a passenger, and I think as a matter of reality and common sense the movement of patrons on the Big Dipper, or any of its associated installations, is in effect movement on one spot. None of those who patronize these entertainments desire that the track should be constructed so that they should visit a particular point. The actual construction of the track is a matter of indifference to them so long as it contains the necessary gradients and corners. In no kind of sense is the patron, in my view, being taken from one place to another, and I think that using the words of the schedule in their ordinary meaning it must necessarily exclude movement which in effect is confined to a single point and does not involve the deliberate movement or transfer of a passenger from one point to another."

It seems to us that "as a matter of reality and common sense" the young person is being taken from, for example, Weymouth to Cherbourg because there is a purpose in his being at Cherbourg; that purpose is to enable him to have a sea voyage to a foreign port where he can experience the life ashore. The same goes for the onward voyage to the Channel Islands. The young people do not, like the riders on the big dipper, "in effect remain in one spot all the time". By contrast, they all "desire … that they shall visit a particular point" such as Cherbourg, Sark or Alderney. They are all, in a real sense, being transported from one point to another. On the strength of that decision we can, we think, safely conclude that the supplies provided by Cirdan are the transport of passengers in all four boats.

One reservation concerns the supplies provided by means of the yacht Duet. It seems to us that the question of whether a ship is "designed or adapted to carry not less than ten passengers" requires to be determined by both the physical specifications of the vessel in question and the legal constraints on its passenger-carrying capacity. Here we accept Mr Back's evidence that Duet can actually carry fourteen passengers on a day trip. But the Small Commercial Vessel Certificate, issued under authority given by the Department of Trade in pursuance of the Merchant Shipping Act, states that nine persons is the maximum number to be carried. To carry more would, we understand, be an offence: see for example Secretary of State for Trade and Industry v Booth [1984] 1 All ER 464. The legal constraint on carrying more than nine persons disqualifies Duet from falling within the words in item 4(a) Cirdan's supplies through its use of Duet are not therefore zero-rated.

Sport or education

Is Cirdan making supplies of sport or education? So far as sport is concerned the supply has to be of "services closely linked with or essential to sport or physical education in which the individual is taking part" to "an individual" : see item 3 of Group 10 of Schedule 9. The actual supply (whatever its true nature may be) is to the organization that enters into the agreement. And what is being supplied here is the apparatus or means by which the organization can make its own provision of sport or physical education to the young people. The same goes for "education". With the possible exception of the £7.00 charged for a RYA Competent Crew Certificate, Cirdan provides no education. The provision of education is the responsibility of the organization that enters into the charter agreement and brings its group of young people. It is no part of Cirdan's obligation to provide education to any of the young people (save for that one minor and, we think, insignificant exception).

Even if we were wrong on both these points we would not conclude that either education or sport displaced the transport of passengers as the dominant supply. That in reality is what Cirdan provides to its customer, the organization, and that is the service that the organization is using.

We do not need to address Cirdan's contention that its supply is that of a qualifying ship within item 1 of Group 8 of Schedule 8. In any event it does not seem to us that Cirdan is providing the ship. It is providing access to berths in the boat for the duration of the agreement.

The second issue

The question here is whether the supplies of repair and maintenance by the boatyards to Cirdan can properly be characterized as zero-rated supplies of repair and maintenance to a qualifying ship. The issue arises in relation to work done by a boatyard in Gloucester to the Queen Galadriel. This involved remedying defects in the keel and the watertight bulkheads and carrying out other extensive restoration work. The work was necessitated to bring the Queen Galadriel up to the standard required of sailing vessels in commercial use by the Marine and Coastguard Agency Regulations; (those regulations are not applicable to vessels that are not used for commercial purposes).

Item 1 of Group 8 to Schedule 8 of the VATA provides for the zero-rating of :

"The supply, repair or maintenance of qualifying ship or the modification or conversion of any such ship provided that when so modified or converted it will remain a qualifying ship."

Note (A1) provides:

"In this group –

(a) A "qualifying ship" is any ship of a gross tonnage of not less than fifteen tons which is neither designed nor adapted for use for recreation or pleasure;"