Why ‘joined up thinking’ is helpful in VAT cases, writes Graham Elliott (City & Cambridge Consultancy Ltd).
It would probably be too much to expect that the law should be construed in accordance with a principle of ‘joined up thinking’, because that would involve too much speculation as to what might be said to join one concept with another. However, the lack of that aspect was what most struck me regarding the First-tier Tribunal’s original decision in the case of Kati Zombory-Moldovan [2016] UKUT 0433 (TCC). I even felt its absence in the Upper Tribunal’s reversal of that decision, though it is essentially implied.
The circumstances in question were craft fairs organised by the taxpayer, in which she made money hiring plots for stall holders to sell their wares. The fairs generally lasted the whole weekend, and were grand occasions with large advertising budgets. The FTT had decided that the supply was exempt as a right, granted to the stall holder, to occupy land. The UT decided that the predominant characteristic was participation in a fair, which was something much more than mere rights over land, and thus taxable.
The UT’s reasoning seemed to be based on the copious evidence that the taxpayer organised and advertised a truly special event. The FTT had somewhat capriciously (in my view) stated that she had no contractual obligation to stall holders to even deliver this event. The UT disagreed (when considering the evidence in the round), and this led it to conclude that the wider event had been procured for the stall holder, and not merely the stall.
At this point, I became somewhat concerned. After all, the owner of a shopping mall needs to promote it to the public as the place to go shopping. Is a Westfield mall to be regarded as not granting rights to occupy land to retailers because it promotes the site as a shopping experience in its entirety? And even if you quibble that it is all a matter of degree, this prompts the troublesome consideration of ‘where you draw the line’.
But what had sprung to mind when reading both the FTT and UT decisions was the possible read-across to the place of supply rules. Supplies relating to land are treated as supplied where the land is situated. Such supplies are more varied than merely those that are exempt by virtue of being rights over land, and can include intermediation and legal services, for instance. However, it seems to me to be illogical to accept that a supply can be exempt as a right over land if it would not even rank as a land-related supply for the purposes of the place of supply rules. So, adopting this ‘joined up thinking’ approach to construing legislation, why don’t we look at article 31a 3(e) of the European Parliament Regulations Chapter V, which includes, in a list of supplies that shall not be treated as ‘connected with immoveable property’: ‘the provision of a stand location at a fair or exhibition site together with other related services to enable the exhibitor to display items, such as the design of the stand, transport and storage of the items, the provision of machines, cable laying, insurance and advertising’.
To my mind, the facts of the taxpayer’s case are very close to this regulation, which means that the regulation would not regard the supply as relating to immoveable property. These regulations were explicitly included in Revenue & Customs Brief 22/12 (but only relating to place of supply). They become binding on member states on 1 January 2017 (though, again, only as regards place of supply). Despite the ostensible limitation to their relevance, I cannot see how a supply can logically be exempted as relating to immoveable property in defiance of any consistency with the place of supply.
I suggest that there is no need to look further into the background. Fairs are a different animal to other shopping situations, and cannot be viewed as giving rise to a real estate supply.
Why ‘joined up thinking’ is helpful in VAT cases, writes Graham Elliott (City & Cambridge Consultancy Ltd).
It would probably be too much to expect that the law should be construed in accordance with a principle of ‘joined up thinking’, because that would involve too much speculation as to what might be said to join one concept with another. However, the lack of that aspect was what most struck me regarding the First-tier Tribunal’s original decision in the case of Kati Zombory-Moldovan [2016] UKUT 0433 (TCC). I even felt its absence in the Upper Tribunal’s reversal of that decision, though it is essentially implied.
The circumstances in question were craft fairs organised by the taxpayer, in which she made money hiring plots for stall holders to sell their wares. The fairs generally lasted the whole weekend, and were grand occasions with large advertising budgets. The FTT had decided that the supply was exempt as a right, granted to the stall holder, to occupy land. The UT decided that the predominant characteristic was participation in a fair, which was something much more than mere rights over land, and thus taxable.
The UT’s reasoning seemed to be based on the copious evidence that the taxpayer organised and advertised a truly special event. The FTT had somewhat capriciously (in my view) stated that she had no contractual obligation to stall holders to even deliver this event. The UT disagreed (when considering the evidence in the round), and this led it to conclude that the wider event had been procured for the stall holder, and not merely the stall.
At this point, I became somewhat concerned. After all, the owner of a shopping mall needs to promote it to the public as the place to go shopping. Is a Westfield mall to be regarded as not granting rights to occupy land to retailers because it promotes the site as a shopping experience in its entirety? And even if you quibble that it is all a matter of degree, this prompts the troublesome consideration of ‘where you draw the line’.
But what had sprung to mind when reading both the FTT and UT decisions was the possible read-across to the place of supply rules. Supplies relating to land are treated as supplied where the land is situated. Such supplies are more varied than merely those that are exempt by virtue of being rights over land, and can include intermediation and legal services, for instance. However, it seems to me to be illogical to accept that a supply can be exempt as a right over land if it would not even rank as a land-related supply for the purposes of the place of supply rules. So, adopting this ‘joined up thinking’ approach to construing legislation, why don’t we look at article 31a 3(e) of the European Parliament Regulations Chapter V, which includes, in a list of supplies that shall not be treated as ‘connected with immoveable property’: ‘the provision of a stand location at a fair or exhibition site together with other related services to enable the exhibitor to display items, such as the design of the stand, transport and storage of the items, the provision of machines, cable laying, insurance and advertising’.
To my mind, the facts of the taxpayer’s case are very close to this regulation, which means that the regulation would not regard the supply as relating to immoveable property. These regulations were explicitly included in Revenue & Customs Brief 22/12 (but only relating to place of supply). They become binding on member states on 1 January 2017 (though, again, only as regards place of supply). Despite the ostensible limitation to their relevance, I cannot see how a supply can logically be exempted as relating to immoveable property in defiance of any consistency with the place of supply.
I suggest that there is no need to look further into the background. Fairs are a different animal to other shopping situations, and cannot be viewed as giving rise to a real estate supply.
