Fortyseven Park Street Limited (the Taxpayer) owns a 60 year leasehold interest in a property, which it has divided into 49 self-contained residences of various sizes. It sells to individuals a fractional interest in the property. The issues before the First-tier Tribunal (FTT) were whether the supplies were a right to participate in a plan, comprising a bundle of benefits; whether the supplies were land related as being a right to occupy reserved residences; and whether the supplies were excluded from the land exemption either under 1(d) (hotel accommodation, inns, or similar establishments, etc.) or under 1(e) (the grant of interest in, the right over or the licence to occupy holiday accommodation).
The Taxpayer argued that the only supply it makes to the members is a grant of a license to occupy non opted land, which falls within the land exemption, such that no VAT is due.
HMRC’s position is that the Taxpayer does not provide any interest in land capable of falling within the land exemption. In its view, the Taxpayer provides a taxable service of the right to participate in a plan (akin to a membership), which includes the provision only of an opportunity for a member to occupy a residence. In any event, alternatively even if the Taxpayer is held to make a supply of an interest in land it would be excluded from the land exemption as accommodation in a similar establishment to a hotel.
The FTT found that the member was paying for the right to occupy the residence for a certain number of nights a year - subject to making a successful reservation each time, and was not paying to obtain club membership. The supply was the letting of immoveable property but it was excluded from the exemption as provision of services by a ‘similar establishment’ due to the additional services offered to buyers (which made it similar to a hotel). To access the decision click here.
The FTT had a lot of difficult and complex issues to consider. First, whether the supply is membership. This was rejected due to the nature of the supply and the limited rights of access that were purchased which differed from the rights of access a club member could expect during the membership period. Next, whether the supply was a right over land – which it was, and when the supply was made – was that when the price was paid or only when the customer used the residence. Here the FTT reached a different conclusion from MacDonald Resorts as there was no uncertainty over the supply when the price was paid, the only unknown was how much each night the customer actually stayed for would cost. So there was no need to defer the time of supply until time of use.
Finally, the FTT had to look at what the customer got while in residence, and the length of each stay (not the length of the agreement) and concluded that the supply was similar to accommodation in a hotel. The consideration was not just linked to the passage of time, the taxpayer actively provided other services to the customers when they were in residence and each stay was temporary and short term. A member pre-paid for short stays, up to a maximum number of such stays each year, with the services expected of a hotel, for a number of years.
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