A valid separation
One of the issues which raises the ire of Customs and Excise is the idea that two linked businesses are operating separately in order to avoid VAT registration. The most well known scenario is, of course, the hairdressing salon and the self employment of the various stylists into separate businesses.
A valid separation
One of the issues which raises the ire of Customs and Excise is the idea that two linked businesses are operating separately in order to avoid VAT registration. The most well known scenario is, of course, the hairdressing salon and the self employment of the various stylists into separate businesses.
The facts of this case were quite different and it emerged that the arrangements made were nothing to do with VAT avoidance, as the two appellants were financially unsophisticated people — to say the least. For many years they had operated a business called Iden Pottery, but for domestic and other reasons this partnership ceased on 31 March 1997.
The son and daughter-in-law of the appellants then started a business under the name Oxney Green, which undertook the marketing and sale of mass produced pottery.
Mr Dennis Townsend was well known in the pottery world and from 1 April 1997 he was a sole proprietor making and manufacturing individual pieces of pottery.
Mrs Townsend, the other appellant, owned and operated a retail business named Iden Pottery. Some of Mr Townsend's creations were on show at the retail shop.
A factory unit had also been retained which was shared between the two appellants and division of relative expenses was arranged at the end of the year at a meeting with the accountant.
Customs and Excise contended that the appellants should not be regarded as separate taxable entities because their activities were not at arm's length and they did not have normal commercial relationships with one another. The appellants alleged that there were two separate businesses and this was the issue that had to be decided by the tribunal.
The record of the tribunal, which was chaired by Judith Powell, was meticulous and exhaustive and numerous facts were considered. However, the case of Burrell v Commissioners of Customs and Excise [1997] STC 1413 was relevant. In this case Mr Justice Ognall stated:
'But I accept for this purpose the way in which the matter is expressed in the helpful skeleton argument on behalf of the Commissioners. They contended that in so far as it was asserted that two separate businesses were carried on respectively by (1) the partnership of father and son, and (2) the son acting alone as a sole trader, the tribunal should examine the substance and reality and should only conclude that there are only separate taxable entities if: (1) the so-called separate businesses are sufficiently at arm's length from the other; and (2) the businesses have normal commercial relationships each with the other.'
A number of other tribunal decisions were referred to but the tribunal came back to the 'Burrell test' repeatedly in its considerations.
In the end it was concluded that Mr and Mrs Townsend were running separate businesses and their appeal was allowed, with costs.
The tribunal stated by way of observation that they had to say that the approach by Customs and Excise to their enquiry was unlikely to result in the department obtaining the most useful information. The number of unannounced visits made during the enquiry was one example of this and the rather dramatic statement about 'lies' on the deregistration form was another. The tribunal wished to make it clear that it did not feel that Mr and Mrs Townsend had set out to obtain a VAT advantage in organising their respective activities.
(Dennis Townsend and Maureen Townsend (17081).).
Not solely charitable
The appellant was the Federation of London Youth Clubs also known as London Youth. The aim of the charity is to give young people a variety of opportunities, which include learning and personal and social development.
The appellants own a property in Buckinghamshire on which substantial building works were carried out. These involved the construction of a two-storey extension to the house itself, the demolition of an existing swimming pool and gymnasium, and the construction of a new building for social and recreational purposes (referred to as the recreation centre). The appellant organisation contended that the supply of building services involved in these works qualified for zero rating.
In connection with the house extension, Customs and Excise had accepted that the supplies qualified for zero rating under now superseded legislation. In respect of the demolition of the swimming pool and gymnasium and construction of the recreation centre, the appellant organisation contended that the supplies fell within Items 2(a) and 4 of Group 5 of Schedule 8 to the Value Added Tax Act 1994, the recreation centre being intended solely for a relevant charitable purpose within the meaning of that expression in Note (6) to Group 5.
The appellant organisation also stated that the building was used otherwise than in the course or furtherance of a business and was used by members of the local community for social and recreational facilities as a village hall.
Customs and Excise contended that the recreation centre was not used solely for a relevant charitable purpose. In addition their submission was that the new building, consisting of a swimming pool, lockers, showers, ancillary rooms, meeting rooms and a stage was not used as a village hall or similarly.
Evidence was given by the person being responsible for the day-to-day running of Woodrow High House, the grounds of which include a children's farm and a special garden for the disabled. The commercial arrangements were also considered. A charge is made to the club concerned when a member attends at Woodrow High House. In the view of Mr Roy Hickman, who had been at the house since 1984, there was a unique relationship between the house and the village.
