Accommodation provided as part of single supply of welfare services

The taxpayer a charity ran a residential centre to assess the parenting capabilities of people referred to it by a local authority. Placements usually lasted for about 12 weeks and the local authority was charged a fixed fee for the services provided.

The dispute concerned whether the accommodation provided by the taxpayer was outside the scope of the welfare exemption (VATA 1994 Sch 9 Group 7 note 7). Note 7 provides that accommodation or catering is excluded from the exemption except when it is ‘ancillary to the provision of care treatment or instruction’. If it was not exempt the taxpayer would be able to recover the related input tax.

The First-tier Tribunal dismissed the taxpayer’s appeal that the accommodation was not exempt. It found that there was a single exempt supply of welfare services so there was no single supply of accommodation.

The taxpayer appealed saying...