12 April 2012
who needs to know?
This is relevant to venue based organisations which hire out their facilities for wedding receptions, wedding anniversary celebrations, and similar celebrations.
what is the issue?
The extent of the possibility of treating the supply as wholly (or partly) exempt from VAT rather than taxable. This is of particular importance to venues which are exempting a charge for the right to use facilities.
We reported, in the wake of the Chewton Glen Hotel case, that the scope for treating supplies in connection with such celebrations as exempt from VAT, being a supply of a bare right over land, had narrowed sharply. In that case the hotel sometimes provided no catering or wedding organisation services at all, but effectively let the grounds and various function rooms at the hotel be used by the customer, who arranged their own catering. This was nevertheless held by the tribunal to be a supply which went beyond that of a bare right over land, and was therefore taxable. However, in that particular instance the organisation in question was a hotel, and it was unable to reassure the tribunal that other hotel guests were not using the same grounds and various parts of the building (toilets, corridors, etc.) at the same time.
The position hardened even further following the decision in Best Images Limited (Tax Tribunal: 480). This involves a venue which is not a hotel. The customers arrange their own catering (albeit through recommended caterers). No ceremony planning services are provided as part of the package, or at all. The building consists of simple large rooms, albeit decorated in an appropriate manner for the kinds of celebrations concerned. One would have thought that if any supply could be regarded as the bare right to use facilities, this might have qualified. But the tax tribunal held that the supply was nonetheless standard rated. This seemed to be on the basis that the proprietors sought, insofar as they were able, to ensure that the hirers had a good experience and that their day (or days) went smoothly. This customer care did not amount to any particular package or promise of any particular service, except to the extent that customers would be “looked after” to whatever extent was reasonable.
The tribunal did not think that this was sufficiently passive and believed that it was essentially a single “added value” service which should therefore be taxed in full.
Subject to any possible appeal on the matter, this makes it very unwise to treat any hire where the hirer is aware that the use will be for a wedding reception or similar celebration as anything other than taxable.
It should be noted that the taxpayer in this case provided no overnight accommodation, no catering and no wedding planning services.
what to do next
If the issues mentioned here concern you, please contact Phil Salmon on: 020 7969 5611 for further advice.
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