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W J DE SOUZA discusses a recent VAT tribunal decision of relevance to the equestrian industry.
W J DE SOUZA discusses a recent VAT tribunal decision of relevance to the equestrian industry.
THE EQUESTRIAN INDUSTRY seems to be placing a great deal of significance on the tribunal decision in Window v Commissioners of Customs and Excise (No 17186) handed down on 11 April 2001. This may be over-optimistic because it is clear that the factual situation is very significantly different from those considered in all the previous cases. It would therefore be unwise to see it as presaging either a general reinterpretation of the law in this area or a difference of approach by tribunals merely because it was a post-Card Protection Plan case.
Supply of stables and ancillary services
The essence of the decision is in paragraph 12:
'Our finding is that, although we are not satisfied that there were written licence agreements signed by each owner, the rent for stables as such was known and it was clear to owners that the rent for the stable was in principle a separate matter from any livery for which they might contract. There was therefore for each owner, whether or not they received livery services, the supply of a licence to occupy land which did not necessarily imply any further supply.'
Earlier cases
This has to be compared to the previous livery cases in the following respects:
Stud farm services: The leading case is Scott v Commissioners of Customs and Excise [1978] STC 191. There were decisions to like effect in Commissioners of Customs and Excise v Bushby [1979] STC 8, and Barr v Commissioners of Customs and Excise LON/96/780. Scott was distinguished by the tribunal in Window as relating to a stud farm, the purpose of the exercise being to have the mares served, the accommodation and feeding being incidental.
Rearing animals: Also distinguished in Window was a case involving keeping and rearing other people's heifers, A R M Smith v Commissioners of Customs and Excise MAN/87/321, the object of the exercise here being to look after and bring on the animals, with feeding and watering being merely an integral part of the overall service.
Livery services: Fidler, t/a Holt Manor Farm Partners v Commissioners of Customs and Excise LON/94/798A, and S & J Marczak, t/a Suzanne's Riding School v Commissioners of Customs and Excise LON/94/1682A, were not referred to by the tribunal in Window. These earlier cases had distinguished between grazing during the summer with minimal supervision (zero rated) and being brought in to a covered yard and fed/watered during the winter (standard rated). In Window, it was recorded as accepted that the livery services looked at in isolation would have been standard rated.
Grass keep: Zero-rated grass keep must be distinguished from exemption. The latter can only apply to an exclusive licence to occupy land and, in relation to fields, this has, historically, been difficult to obtain, such treatment being refused in King v Commissioners of Customs and Excise [1980] VATTR 60. It must, furthermore, now be regarded as an impossibility on a shared field basis as a result of two recent decisions of the European Court of Justice (Commission v UK [2000] STC 777 and Stockholm Ludopark AB v Swedish State [2001] STC 103.
The supply in the Window case
In this context it needs to be emphasised that the exemption claimed to be the principal supply in Window related to separate stabling, the status of which in isolation was not disputed by Customs. This is made clear in paragraphs 6, 7 and 39 of the decision which emphasised that it related only to instances where stabling had been provided.
It also needs to be borne in mind that Card Protection Plan v Commissioners of Customs and Excise [1999] STC 270 enunciated effectively the same doctrine as that advocated by the Court of Appeal in Commissioners of Customs and Excise v British Airways [1990] STC 182, of which Scott was a precursor.
Composite supply of stabling
While zero rating founds input recoveries, exemption does not. The difference to the livery business could be very material. The issue before the tribunal in Window was whether those owners who made combined payments for livery and stabling (there being a variety of different levels of service available, but none of them available without stabling) received the livery services as an ancillary supply to the stabling, rather than one which was independent of it. The tribunal so held, with the result that not only was the totality not, as Customs contended, a composite standard-rated supply, but that it was (as submitted by the taxpayer) a composite exempt supply.
In consequence, the result of the Window case is that the outputs of the stable were wholly exempt, so that no input recovery could be made for not only farriers and vets' services but also for any expenditure on the premises, be they repairs or the original conversion costs. The end result for offerors of livery services may not be an unmixed blessing, indeed if considerable conversion work had been undertaken, it would probably be desirable from a cash flow point of view so to design the service offered that it comes within the standard-rate category, even at the cost of an apparent 15 per cent competitive disadvantage as against stables operating under the Window decision.
W J de Souza is a consultant to White & Bowker.
