In HMRC v Kati Zombory-Moldovan (trading as Craft Carnival)3 , the UT has held that the grant of a right to use a stall or pitch at a craft fair did not amount to the grant of a “licence to occupy land” and was not therefore exempt from VAT under Schedule 9, Group 1, VATA.
Craft Carnival (CC) organised craft fairs in and around Dorset. In a typical year, five or six such fairs would be held. Each of them would take place over a weekend and last two to three days.
A brochure listing the fairs for the coming year was sent out on an annual basis to some 4,000 craft workers and gardening goods suppliers, which specified the fee for a licence to use a stall or pitch at a particular event to be £180.
In addition to providing the licence itself, CC arranged for the erection of marquees, which were hired for the duration of a fair, and also arranged for the provision of other necessary temporary facilities including portable toilets, electrical generators and security fencing. CC also employed between five and seven members of staff to act as ticket sellers and car park marshals.
Before the FTT, CC argued that it had only supplied the right to use an allocated space, which fell within the EU law criteria of “leasing or letting of immoveable property” and was therefore an exempt supply under VATA as a “licence to occupy land”.
Conversely, HMRC argued that CC supplied a standard-rated package of “services” to enable the stallholders to trade, which should be subject to VAT.
The FTT considered that, following Secret Hotels2 Ltd (formerly Med Hotels Ltd) v Revenue and Customs Commissioners4 , it was necessary to consider the economic reality of any arrangement in order to determine the nature of a supply. Under domestic law, the fundamental characteristic of a supply in respect of leasing or letting of immoveable property was the ability to exclude others from occupying as owner. In the instant case, stallholders occupied the pitch supplied by CC as owner to the exclusion of any other person. The FTT therefore concluded that the supply was an exempt supply of a licence to occupy land and allowed CC’s appeal.
HMRC appealed to the UT.
The UT allowed HMRC’s appeal.
The UT considered the facts of the present case to be similar to those in International Antiques and Collectors Fairs Ltd v HMRC5 , in which the contracts with which the case was concerned were for “the provision of a service of participation as a seller at an expertly organised and expertly run antiques and collectors fair”. The contracts did not, therefore, have as their essential object the making available of property.
The UT concluded that that was the situation in the present case. CC had “very real and significant responsibilities beyond the bare provision of an appropriately-sized plot with, potentially, a table and chairs”, including the provision of a variety of facilities and the employment of staff. Accordingly, CC’s supplies to stallholders did not fall within the land exemption and the fees paid for stalls and pitches were subject to VAT.
This case serves as a useful reminder of the strictness with which courts and tribunals are obliged to interpret exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person. In this case, the intended effect of the exemption did not extend to the provision of the various services provided in addition to the licence to occupy land, and the UT decided that the supply should not be VAT exempt on that basis.
A copy of the decision can be found here.