A recent announcement from HMRC (Brief 04/11) makes that point in regard to commercial sports leagues. Apparently, the suppliers in question have looked at their supply and broken it down into constituent parts. One of those parts is letting land to participants. If you look at the letting separately then it appears like an exempt supply of land (though where sporting land is concerned the rules are rather more detailed than that implies). The additional aspects of the supply are running a competition or league between participating teams, involving all the arrangements such as officiating, keeping score, producing any prizes that might apply, and so on. Is there a separate supply of a right over the playing fields which can make part of the price for this service exempt? In other words, can the supply of the right over the land add up to a separate and meaningful supply?

 

HMRC says not, and it is difficult to criticise that view in the light of the case law on the topic. In what sense does the participant want to enjoy the access to the land as a distinct benefit? How useful is that to him without the remaining aspects he is paying for?  And if there is no separate utility for the customer, isn’t it more sensible to look at what he gets in total for his money and adopt the taxation interpretation applicable to that (which in this case is that VAT applies to all of it)?

 

A recent Upper Tax Tribunal decision (Bryce) made the same point, though here the case is more finely balanced. The supply, looked at holistically, was of a “children’s party” (or the facilities for it at least). Both the taxpayer and the Lower Tribunal thought there was an exempt supply of a right over a barn premises, plus a separate taxable supply of catering for the children. That was because the children always played in the barn first, and then moved to an adjacent room to consume the refreshments. Once out of the barn, they did not re-enter, so the phases of the supply were distinct. You can appreciate that access to the barn could be separately supplied and would be of value to the participants. The refreshments could be separately supplied and be of value separately. This is less clear cut than the sports league issue. But the Upper Tribunal still felt that the actual supply the children (or parents) wanted was the supply of a party. That is a wider category of supply than a bare right over land, so all of it is taxable.

 

That’s a tough call. But nonetheless, the logic of decisions in such cases seems inexorably to point towards looking at the sum of the parts (when supplied by one supplier) rather than the separate parts in themselves. 

 

It’s constructive, not deconstructive.