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20325
EXEMPTION – Land – Letting or leasing of immoveable property – Hairdressing salon owned by Appellant – Arrangements with stylists – Stylists granted right to occupy chair and designated area in up-and-running salon – Fixed fee charged for that right – Stylist has access to other salon facilities in return for a service charge based on stylist's turnover – Whether grant of right to occupy an exempt supply – No – Art 13B(b) of Council Directive 77/388/EEC – Whether single standard rated supply of all facilities provided by salon owner – Yes – Appeal dismissed
LONDON TRIBUNAL CENTRE
ANDREW HOLLAND T/A THE STUDIO HAIR COMPANY Appellant
- and –
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents
Tribunal: SIR STEPHEN OLIVER QC (Chairman)
DIANA WILSON
Sitting in public in London on 26-27 June 2007
Edmund King, counsel, for the Appellant
Sarabjit Singh, counsel, instructed by the general counsel and solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2007
DECISION
The agreement
"1. This Licence is granted to provide the Licensee with an area of land for the conduct of business, either in part or in total in the salon owned and operated by the Owner and is intended to create an exempt licence to occupiers defined by VAT legislation.
- This Licence does not give the Licensee exclusive possession of the Designated Area or the Salon and the Owner is entitled to enter and use the Designated Area at any time provided that such entry or use shall not in any way hinder or obstruct the Licensee's business activity in accordance with the terms hereinafter appearing.
- This Licence is personal to the Licensee and it cannot be transferred or assigned. The Licensee is not entitled to permit anyone, other than those employed by or having business with the Licensee, to have access to the Designated Area".
"2. To allow the Licensee access to all other parts of the Salon not forming part of the Designated Area required for the purpose of providing his clients with the services of a hairdressing business, including those services normally ancillary to hairdressing, together with reasonable access to the staff room, kitchen and toilet facilities.
- To allow the Licensee and his clients access to the Designated Area and to open and keep open the salon on not less than 250 days a year during normal shop business hours, and to open the salon at such other times as the Owner in his absolute discretion may determine.
- To use his best endeavours to promote his own business and the Salon and to keep the Licensee advised, so far as possible, as to his hours of business."
"1. That section 4 of this Agreement constitutes a licence over land and confers no tenancy whatsoever on the contractor and that possession of the Salon is retained by the Owner until expiration or termination of this Agreement.
- The Licensee is not entitled to exclusive occupation or possession of the Designated Area and shall not at any time or in any manner do any act which may impede the Owner or any duly appointed representative of the Owner in the exercise of his rights of possession or control of the Designated Area.
- The Owner is specifically authorised and permitted to use the Designated Area for his hairdressing business, including those activities normally ancillary to hairdressing, in the event that (i) the Licensee is absent from the salon for a period of more than 15 consecutive working days or (ii) the Licensee has informed the Owner or his servant, employee or agent in advance of his absence and consented in writing to such use of the Designated Area.
- The Licensee is specifically authorised and permitted to retain a locum tenens as the need arises and/or to employ a person to help and assist him with his business …"
How exclusive is each stylist's Designated Area?
The use made by the Stylists of the salon and its facilities
The significance to the Stylist of the right to use the Designated Area
The service charge
The Licence Fee
Contentions
Was there a leasing or letting of immoveable property within Article 13B(b)?
"The presence in the contract of such restrictions on the right to occupy the premises let does not prevent that occupation being exclusive as regards all other persons not permitted by law or by the contract to exercise a right over the property which is the subject of the contract of letting."
The Court expressed that view without purporting to prescribe the outcome in that case. Paragraph 26 of the Court's judgment goes on to say that:
"As regards the transaction at issue in the main proceedings is for the national court to consider all the circumstances surrounding it in order to establish its characteristics and to assess whether it can be treated as a "letting of immoveable property" within the meaning of Article 13B(b) of the Sixth Directive."
This brings us as the national court back to the reality of the situation. The other people who come on to a particular stylist's designated area are not just those specifically permitted under the agreement (i.e. the Owner); they include anyone who is lawfully in the salon. The Stylist does not enjoy a monopoly over her designated area and, as the Advocate General commented in the last sentence of paragraph 22 of his opinion in Temco:
"The decisive factor is the monopoly enjoyed by the tenants, who are seen by everyone to be in possession of the leased property …"
Unlike the three co-occupying companies in Temco the stylist has, if anything, a lesser status. She is a user of the chair and of some of the surrounding area designated to her by the Agreement. We see this situation as one where, to use the words of Lord Nicholls in Sinclair Collis [2001] STC 989 in paragraph 35, "the licence is more naturally to be regarded as a licence to use land rather than licence to occupy land."
Is there a single supply : and, if so, what is its character?
Costs
SIR STEPHEN OLIVER QC
CHAIRMAN
RELEASED: 28 August 2007
LON 2003/0173