Revenue And Customs v Fortyseven Park Street Ltd

The exemption for “the leasing or letting of immovable property” has been considered on a number of occasions by the Court of Justice of the European Union (“the CJEU”). Amongst the points that emerge from the authorities are these:

It is worth quoting in full some of the CJEU’s judgment in Temco, the leading case:

“20.

While the court has stressed the importance of the period of the letting … it has done so in order to distinguish a transaction comprising the letting of immovable property, which is usually a relatively passive activity linked simply to the passage of time and not generating any significant added value (see, to that effect, Stichting ‘Goed Wonen’ v Staatssecretaris van Financiën (Case C-326/99) [2003] STC 1137, [2001] ECR I-6831, para 52), from other activities which are either industrial and commercial in nature, such as the exemptions referred to in art 13B(b)(1) to (4) of the Sixth Directive, or have as their subject matter something which is best understood as the provision of a service rather than simply the making available of property, such as the right to use a golf course (Sweden v Stockholm Lindöpark AB (Case C-150/99) [2001] STC 103, [2001] ECR I-493, paras 24 to 27), the right to use a bridge in consideration of payment of a toll (EC Commission v Ireland (Case C-358/97) [2000] ECR I-6301) or the right to install cigarette machines in commercial premises (Sinclair Collis Ltd v Customs and Excise Comrs (Case C275/01) [2003] STC 898, [2003] ECR I-5965, paras 27 to 30).

21.

The actual period of the letting is thus not, of itself, the decisive factor in determining whether a contract is one for the letting of immovable property under Community law, even if the fact that accommodation is provided for a brief period only may constitute an appropriate basis for distinguishing the provision of hotel accommodation from the letting of dwelling accommodation (Blasi v Finanzamt München I (Case C346/95) [1998] STC 336, [1998] ECR I-481, paras 23 and 24) …

23.

Furthermore, while a payment to the landlord which is strictly linked to the period of occupation of the property by the tenant appears best to reflect the passive nature of a letting transaction, it is not to be inferred from that that a payment which takes into account other factors has the effect of precluding a ‘letting of immovable property’ within the meaning of art 13B(b) of the Sixth Directive, particularly where the other factors taken into account are plainly accessory in light of the part of the payment linked to the passage of time or pay for no service other than the simple making available of the property.

24.

Lastly, as regards the tenant’s right of exclusive occupation of the property, it must be pointed out that this can be restricted in the contract concluded with the landlord and only relates to the property as it is defined in that contract. Thus, the landlord may reserve the right regularly to visit the property let. Furthermore, a contract of letting may relate to certain parts of a property which must be used in common with other occupiers.

25.

The presence in the contract of such restrictions on the right to occupy the premises let does not prevent that occupation being exclusive as regards all other persons not permitted by law or by the contract to exercise a right over the property which is the subject of the contract of letting.”

The Luc Varenne case illustrates how a transaction involving the letting of immovable property (in that case, a football stadium) can be taken out of the land exemption by the provision of other services. In Luc Varenne, the CJEU ruled that article 13B(b) of the Sixth Directive (now article 135(1)(l) of the Principal VAT Directive):

“must be interpreted as meaning that the act of making available, for consideration, a football stadium under a contract reserving certain rights and prerogatives to the stadium owner and providing for the supply, by the owner, of various services, including services of maintenance, cleaning, repair and upgrading, representing 80% of the charge which is agreed in the [contract] to be payable, does not constitute, as a general rule, a ‘letting of immovable property’ within the meaning of that provision”.

In the course of its judgment, the CJEU said this:

“29.

In the circumstances of the main proceedings, what seems to be involved is the supply, by the corporation [i.e. the entity which ran the football stadium], of a more complicated serviceconsisting of provision of access to sporting facilities, wherethe corporation takes charge of the supervision, management,maintenance and cleaning of those facilities.

30.

As regards, first, supervision, namely the rights of access to the sporting facilities and the control of that access conferred on the corporation, it is true that those rights cannot, in themselves, preclude the classification of the transaction at issue in the main proceedings as a letting within the meaning of art 13B(b) of the Sixth Directive. Such rights may be justified in order to ensure that the use of those facilities by the lessees is not disturbed by third parties. The court has previously stated that the presence of restrictions on the right to occupy the premises let does not prevent that occupation being exclusive as regards all other persons not permitted by law or by the contract to exercise a right over the property which is the subject of the letting contract (judgment in Belgian State v Temco Europe SA (Case C-284/03) [2005] STC 1451, [2004] ECR I-11237, para 25).

31.

In the circumstances at issue in the main proceedings, the rights of access to the sporting facilities and the control of that access seem none the less to have the effect, by means of a caretaking service, that representatives of the corporation are permanently present at those facilities, which could be evidence to support the view that the role of the corporation is moreactive than that which would arise from a letting of immovableproperty within the meaning of art 13B(b) of the SixthDirective.

32.

As regards, secondly, the various services of management, maintenance and cleaning, it appears that they are, for the most part, actually necessary to ensure that the facilities in question are suitable for the use for which they are intended, in other words sporting events and, more specifically, football matches in accordance with the applicable sporting regulations.

33.

It must therefore be held that the facilities required for that purpose are, by means of the offered services of repair and upgrading, made available to RFCT [i.e. the football club with which the corporation had contracted] in a condition which permits their use for the agreed purposes and that the provisionof access to those facilities for that specific end constitutes thesupply which is characteristic of the transaction at issue in the main proceedings (see inter alia, by analogy, the judgments in Ministero dell'Economia e delle Finanze v Part Service Srl (Case C-425/06) [2008] STC 3132, [2008] ECR I-897, paras 51 and 52; Field Fisher Waterhouse LLP v Revenue and Customs Comrs (Case C-392/11) [2013] STC 136, para 23; and Minister Finansow v RR Donnelley Global Turnkey Solutions Poland sp z oo (Case C-155/12) [2014] STC 131, para 22).

34.

In that regard, the economic value of the various services supplied, those representing, according to the order for reference, 80% of the charge which is agreed in the contract to be payable, also constitutes evidence which supports the classification of the transaction at issue in the main proceedings, considered as a whole, as a supply of servicesrather than as a letting of immovable property within themeaning of art 13B(b) of the Sixth Directive” (underlining added).

Article 1(2) of the Principal VAT Directive explains that the principle of the common system of VAT “entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services”. Amongst the transactions subject to VAT are “the supply of goods for consideration within the territory of a Member State by a taxable person acting as such” (article 2(1)(a)) and “the supply of services for consideration within the territory of a Member State by a taxable person acting as such” (article 2(1)(c)). By article 73:

“the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party …”.

The VATA contains provisions to similar effect. Under section 4(1), VAT is to be charged on “any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him”. “Supply” includes “all forms of supply, but not anything done otherwise than for a consideration” (section 5(2)(a)).

The following propositions can be derived from the case law:

The issues we have to decide can be summarised as follows:

I shall take these issues in turn.

It is common ground between the parties that the relevant supplies were made when Members entered into the Agreement and paid for their Fractional Interests. Miss Hui Ling McCarthy QC, who appeared for HMRC, argued that a Member did not at that stage obtain any “right to occupy property as if that person were the owner and to exclude any other person from enjoyment of such a right”, as required by the land exemption (see paragraph 23(iv) above). The Member would not acquire such a right unless and until he successfully made a reservation. There was, moreover, no guarantee that he would be able to reserve a residence for any particular dates (or at all), and even Primary Use Time could not be rolled over to a future year. What a Member obtained at the time of supply was, Miss McCarthy said, the opportunity to book accommodation, not an actual right to occupy property. An analogy could, Miss

The FTT and UT were not persuaded by such arguments. The FTT said in paragraph 201 of its decision:

“In our view, … it is clear that the members are paying the price in return for the right to occupy a residence under the Primary Use Time and Extended Occupancy Time rights albeit that these rights can be exercised only once a successful reservation is made. It must be the case that, in paying such a substantial sum upfront (ranging from £92,000 to £243,000), a member intends to obtain the right to reserve and occupy a residence of the specified type under these rights. In plain terms, a member pays the price in order to be able to occupy a luxury residence in a desirable location in the heart of Mayfair in London for a maximum period of time each year on an ongoing basis over many years.”

The FTT did “not consider that the fact the occupation right is not immediate, that occupation has to be reserved and, that the precise period of occupation and particular residence which will be occupied is not known at the outset, means that [FPSL] is not making a supply of a ‘letting of immovable property’” (paragraph 208). The reservation system, the FTT said, “is merely the process by which the member obtains what he actually intends to acquire in return for the price, namely, occupation or enjoyment of a reserved residence of the specified type” and “is provided as part and parcel of those occupation rights” (paragraph 212). The FTT did not think that the “highly theoretical possibility” that a Member would not be able to reserve any nights detracted from “the economic reality of the position that a member intends to obtain occupancy rights in return for the purchase price” (paragraph 222).

The UT arrived at a similar conclusion. In its view:

“The supply by FPSL is more than the grant of a right to enter 47 Park Street and to occupy a Residence if one is found to be available. It is the grant of a right to occupy which can be exercised by the making of a reservation”

(see paragraph 63 of the decision). The “true underlying supply”, the UT said, “is of a licence to occupy, which a member can exercise by means of the reservation system”

I agree. Miss McCarthy herself accepted that the land exemption does not necessarily require the recipient of a supply to know from the outset which of a number of properties he is to occupy. She maintained that, at the time of the supply in the present case, there was no guarantee that a Member would be able to occupy anything for even the 21-night Primary Use Time. That, however, was a “highly theoretical possibility” (in the FTT’s words) rather than a real one. As Mr Dowling explained in his evidence, there is no issue in practice: FPSL “is able to satisfy the requirements of members as regards reserving their Primary Use Time albeit that members may not always get their first choice of nights or may have to go on the waiting list” (see paragraph 10 above). In the circumstances, the UT was right to see the reservation system as “facilitative” rather than introducing conditionality such as to make the land exemption unavailable. The economic reality is that a Member gained a sufficient right to occupy from the start.

I would not accept Miss McCarthy’s contentions on Issue 1.

As already noted, “leasing or letting of immovable property” is “usually a relatively passive activity linked simply to the passage of time and not generating any significant added value” (see paragraph 23(v) above). Miss McCarthy submitted that the transactions at issue in the present case amounted to more than “relatively passive activity”. The position was rather that significant added value was being generated by FPSL. Miss McCarthy did not suggest that the commercial “tie-ins” mentioned in paragraph 15 above are relevant in this context. She relied on the provision to Members of, first, the hotel-type services provided by the Manager and, secondly, “commercial add-ons” (specifically, the “Additional Plan Benefits”). The transactions thus involved going above and beyond the exploitation of “immovable property” as such.

Miss McCarthy’s contentions were in part based on the proposition that the Manager, which has no contractual relationship with any Member, does not supply services to the Members direct but via FPSL. Her position was that the hotel-type services are supplied to Members by FPSL, by means of supplies made to it by the Manager.

The FTT did not address these arguments in terms. The UT did, and rejected them. The UT said this on the subject (at paragraph 74 of its decision):

“It is true that the Membership Agreement provides access to additional benefits, including the services provided by the Manager. Even if the correct legal analysis is that FPSL procures, by sub-contract, the Manager’s services for the benefit of members, such procurement is in our view itself a relatively passive activity as far as FPSL is concerned and, in view of the fact that the Manager’s services are separately paid for by the members through the Annual Residence Fee, it adds no significant value to FPSL’s supply. There is no evidence, as there was in Luc Varenne (see para 34) of the economic value of the individual elements of FPSL’s composite supply, but there is no reason to conclude that the provision by FPSL of access to the Additional Plan Benefits can have attributed to it any material proportion of the overall economic value of the Fractional Interest supplied under the Membership Agreement. Nor was the grant of any such right, either in relation to the management of the property or of access to the Additional Plan Benefits, the active exploitation by FPSL of the property: all relevant services were supplied by others, with FPSL’s role remaining passive at all times.”

The UT went on, in paragraph 75 of its decision (quoted in paragraph 18 above), to reject the FTT’s sub-contract analysis and to say that, in its view, the supply of management and administration services was in fact “by the Manager to the members in return for the Annual Residence Fee, which was paid directly to the Manager”. In other words, the UT took the view that the hotel-type services were supplied by the Manager rather than FPSL but that, even were it wrong about that, FPSL’s role was sufficiently passive for the land exemption to apply.

Miss Hall supported the UT’s conclusion. She distinguished between access to services and the services themselves. FPSL, she said, was contractually obliged to provide Members with access to the services to which Miss McCarthy referred but did not itself supply the actual services. The grant of a Fractional Interest for a very large sum would, she accepted, have been hollow or illusory if it did not include the right to the hotel-type services that the Manager was to deliver. However, such services involved a distinct supply, and their supplier was the Manager, not FPSL. What FPSL was supplying (viz. access) was both ancillary and passive. Were, moreover, FPSL to be deemed to be the supplier of the hotel-type services, they should be seen as either ancillary or part of a composite supply of versatile ownership

One question then is: to whom does the Manager supply its services? Is it, as Miss McCarthy argued, FPSL? Or are the services supplied direct to Members, as Miss Hall maintained?

I do not find this an easy point. On balance, however, I have arrived at the conclusion that the Manager’s services are supplied via FPSL. In other words, the Manager supplies its services to FPSL, which, in turn, supplies them to Members.

The contractual position is “the most useful starting point” (to use the words of Lord Reed in WHA Ltd v Revenue and Customs Commissioners [2013] UKSC 24, [2013] STC 943, at paragraph 27). The Manager cannot provide its services in pursuance of any contract with any Member since there has never been any such contract. In contrast, it can be seen from the Agreement that an agreement exists between the Manager and FPSL. Further, FPSL has not only entered into a contract with each

The CJEU referred in Newey to the possibility of contractual terms “constituting a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions” (see paragraph 28(v) above). In the present case, however, there is no reason to suppose that the Manager’s significance has been in any way disguised or played down in the contracts.

Nor, in my view, is there any other sufficient reason to conclude that the economic and commercial reality does not accord with the contractual position. It is true that it is the Manager which collects the Annual Residence Fee (including the 15% Management Fee), but that arrangement is not inconsistent with the Manager being considered to supply its services via FPSL. The consideration for a supply can potentially come from a third party (see paragraph 28(iv) above). It is also to be observed that the Agreement provides for the collection by the Manager of the “Purchase Price” as well as the Annual Residence Fee (see paragraph 11 above).

Pointing out that MGRC charges VAT on its supplies as the Manager, Miss Hall spoke of the danger of double taxation. Treating FPSL as the supplier of the hoteltype services would mean that it had to account for VAT too, she said. If, however, the correct analysis is that the Manager supplies its services to FPSL which, in turn, supplies them to the Members, FPSL must be entitled to recover as input tax VAT levied by the Manager. That removes any risk of double taxation.

In the circumstances, it seems to me, as I have said, that the better view is that FPSL itself supplies the hotel-type services provided by the Manager. It does not necessarily follow, however, that Issue 2 should be determined in HMRC’s favour. The supplies at issue before us are those for which Members paid large lump sums and which it is common ground were made when Members entered into the Agreement and effected payment. To my mind, those supplies cannot be assimilated with the supplies of hoteltype services that are made on an ongoing basis. While it may be right to regard FPSL as having promised to make the latter species of supply (using the Manager), I would still see the actual delivery of the hotel-type services as involving separate supplies from those with which we are concerned on this appeal. It thus remains to be considered, as it appears to me, whether the UT was right to think that, even if FPSL procured the Manager’s services by way of sub-contract, its role was relatively passive and added no significant value.

In the course of her submissions, Miss Hall stressed features of the Agreement which could be said to indicate that the “essential object” of the transactions at issue was the making available of property rather than the provision of a service. A Member, she noted, is given the right to occupy a residence or, if he prefers, to “exercise the Additional Plan Benefits in lieu of occupancy”. As the FTT observed, Members “can realise value from their interests in that they can rent out a reserved residence of the specified category rather than occupying it, they can sell their interest or use it as security and they can in effect exchange reserved nights for other accommodation/benefits” (paragraph 282(4) of the FTT decision). Further, a Fractional Interest lasts many years and a Member can play some (albeit limited) part in how 47 Park Street is run through the Members Committee. Miss Hall also made the point that no part of the purchase price can be identified as having been paid in return for FPSL’s commitments in respect of the Manager’s services.

As, however, Miss Hall recognised, the grant of a Fractional Interest would have been hollow without the services that were to be provided. Members did not pay large purchase prices to obtain bare physical space. Marketing material held out the prospect of “the amenities and service of a five-star hotel” (see paragraph 5 above), and that was reflected in the Agreement: a Member was promised hotel-type services. The FTT commented that, from a member’s perspective, it “would expect the perception to be that the facilities and services to be enjoyed on occupying a residence are part and parcel of what he receives as an owner of a fractional interest” (paragraph 294 of its decision). That must be right.

In the end, I have concluded both that the grant of a Fractional Interest involved more than a mere letting transaction and that the obligations which FPSL undertook as regards the provision of hotel-type services cannot be regarded as ancillary or (in the words of the CJEU in Temco) “plainly accessory”. The “essential object” of the transactions was not, as I see it, “the making available, in a passive manner, of premises or parts of buildings in exchange for a payment linked to the passage of time”, but “the provision of a service capable of being categorised in a different way” (to quote the CJEU in Temco once again). This was not “simply the making available of property” (Temco, paragraph 20 of the judgment), but pre-payment for accommodation “in an environment similar to a hotel and with the services which can be expected in a hotel, repeatedly over a number of years” (paragraph 289 of the FTT decision). As in the Luc Varenne case, what was being supplied was “a more complicated service”. It is also not without relevance that the land exemption has to be construed strictly (see paragraph 23(ii) above).

FPSL may also be said to have generated “added value” in relation to the Additional Plan Benefits. These lend some further support to HMRC’s case. I would question whether FPSL’s obligations in respect of the Additional Plan Benefits would, taken in isolation, have prevented the land exemption from applying, but I do not need to decide the point.

I respectfully take a different view from the UT on Issue 2 and would allow the appeal on that ground.

The conclusions I have reached thus far are sufficient to dispose of this appeal. Having, however, heard full argument on the point, I also think it appropriate to address Issue 3, namely, whether, supposing that (contrary to my view) FPSL’s supplies were in principle capable of falling within the land exemption, they were excluded from the exemption by Item 1(d).

The FTT decided that Item 1(d) was in point. It said this on the subject:

“[285] Members and non-members both occupy the same residences and receive the benefit of the same facilities and services as can be expected at a hotel. Essentially the question is whether [FPSL] supplies a residence as a dwelling, rather than as accommodation in a hotel/similar establishment, by virtue of the fact that [FPSL] grants a member the right, which is paid for in full upfront, to stay in a residence on a repeated short-term basis over many years on the basis that the member pays for a proportionate share of the running costs of the property and for the type of services that can be expected at a hotel under separate fees paid to a different party. In other words, the issue is whether these factors (and the related ones referred to by [FPSL] …) create a ‘passive’ letting of dwelling accommodation or can be said to involve ‘more active commercial exploitation’ of the kind typical in the ‘hotel sector’.

[286]

We have found this a difficult issue but looking at all the circumstances, we have concluded that the provision of the residences to members under their fractional ownership interests, falls within the exclusion in item 1(d). In forming that view we are mindful that, whilst the Directive exemption is to be construed strictly (but not such as to deprive it of its intended effect), the Directive hotel exclusion is to be interpreted broadly (as stated in Temco …).

[287]

It seems to us that the essential characteristic of occupation of accommodation in the ‘hotel sector’ is the flexible and relatively short-term nature of a stay in premises provided with the attendant facilities and services that can be expected for such short-term and/or occasional stays and the resulting required greater supervision and management. In that context, in our view it is the duration of the stays rather than the length of time through which such short stays may be enjoyed that is the key factor ….

[288]

In this case members occupy residences for short periods of time in each year, under a relatively flexible reservation system, whereby they may occupy for a single night or more at a time at any point during the year up to a permitted maximum of nights (albeit subject to restrictions, such as in peak periods and at weekends). The occupation is provided in premises which are similar to a boutique hotel with many of the attendant facilities and services which can be expected in a hotel. The purchase price a member pays for those stays is linked to the duration of the short-term stays in the residence in each year rather than to the duration of the agreement itself. Mr Dowling explained that essentially the pricing of the transaction with members gives members a discounted rate for their stays compared with non-members.

[289]

The commercial reality is that a member pre-pays for the flexibility to enjoy short stays of a stated maximum amount each year, in an environment similar to a hotel and with the services which can be expected in a hotel, repeatedly over a

number of years. It is difficult to see that, as a matter of principle, such stays change their character because, in effect, the member has an on-going right to enjoy such short stays for which he pre-pays at the start.”

A little earlier in its decision, the FTT had noted respects in which a Member’s position differed from that of a non-Member. It identified the main ones as follows in paragraph 282:

“(1)

A non-member occupies on an occasional or ad hoc basis (subject to availability/prior reservation) at a single daily commercial rate. Members occupy under a long-term right in return for the payment of an upfront price and have rights to stay for a maximum number of nights per year. There are detailed reservation rules but, essentially, subject to making a successful reservation, a member has flexibility to choose when he wishes to occupy and for what length of period (subject to seasonal and weekend restrictions) up to the maximum permitted occupancy in any given year.

(2)

A member may permit others to occupy a residence reserved under his Primary Use Time rights.

(3)

A member’s right to occupy is subject to the member paying the Annual Residence Fee, which covers both costs of the Property and services which may be termed ‘hotel services’ as set out above (and to remaining in Good Standing). There is no overt charge of an equivalent type for non-members.

(4)

Unlike a hotel guest, members can realise value from their interests in that they can rent out a reserved residence of the specified category rather than occupying it, they can sell their interest or use it as security and they can in effect exchange reserved nights for other accommodation/benefits.

(5)

Members have a Members Committee which has some limited input on the management of the Property/plan.”

The UT recorded that there was no doubt, and it was common ground, first, that “one of the elements of the Fractional Interest obtained by a member is a right, subject to reservation, to occupy accommodation which is, or includes, sleeping accommodation” and, secondly, that “the setting of the accommodation was of the nature of a small boutique hotel, with many of the services associated with high-class hotel accommodation”, so that 47 Park Street is a “similar establishment” to a hotel, within the meaning of Item 1(d) (see paragraph 94 of its decision). The UT also recognised that “the determination whether a supply falls within or outside the hotel sector exclusion involves a multi-factorial assessment” (paragraph 101) and that “an appeal court or tribunal should be slow to interfere with a multi-factorial assessment based on a number of primary facts” (paragraph 107).

The UT considered, however, that the FTT had made an “error of principle” by “having regard in the circumstances of this case to the length and characteristics of the individual stays to which a member was entitled by virtue of the Fractional Interest acquired, and not to the nature of the supplies of the Fractional Interests made by FPSL to the members, with their accompanying rights and obligations under the Membership Agreement” (paragraph 108 of the decision). In the UT’s view, the supply at issue was of “a right which comprises more than something in the nature of short-term accommodation in the hotel sector” (paragraph 95). The UT continued:

“The member obtains a right which not only endures, but which can be sold (whether as part of the Resale Programme or independently), used as security or as a guarantee for a loan to fund the purchase of the Fractional Interest or turned to account through the optional Rental Programme. Moreover, as Ms Hall submitted, the supply of a Fractional Interest carries with it financial obligations and risks that are alien to supplies of accommodation in the hotel sector. In order to preserve their rights, Members are required to pay an annual residence fee to the Manager to cover maintenance, management and administration, and, through the Members’ Committee, they have a wider involvement in how the property is run.”

As the UT saw things, the FTT had “erred in law in focusing on the duration of the individual stays that could be made by a member by virtue of the Fractional Interest which the member acquired from FPSL” (paragraph 94). In the UT’s view (see paragraph 94):

“That, in our judgment, failed to have proper regard to the nature of the supply made by FPSL. That supply was not of a series of individual short-term stays; it was a supply of a longterm right to occupy a reserved Residence during the relevant periods. It is not in our view permissible to apply Item 1(d) by reference to the individual, and short-term, stays which may be enjoyed as a consequence of the exercise of the long-term right acquired. Nor can the supply or supplies be characterised by the way in which the price for the supply has been set, or the fact that, when judged against the pricing for non-members, it can be calculated that members receive an effective discounted rate for the stays which can be reserved by virtue of their Fractional Interests.”

Miss Hall advanced submissions to similar effect. The only way, she said, in which a typical customer can enjoy sleeping accommodation in a hotel or similar establishment is to sleep in it. The Fractional Interests granted to Members comprise a more complex bundle of rights. The supply to a non-Member staying at 47 Park Street might be of “sleeping accommodation”, but the supply to a Member was fundamentally different. The fact that one element of the latter supply conferred the right to “sleeping accommodation” is irrelevant. What matters is the nature of the supply as a whole, not individual ingredients of that supply.

In my view, however, the UT was not entitled to interfere with the FTT’s decision. Under Item 1(d), “the provision in an hotel … or similar establishment of sleeping accommodation” is excluded from the land exemption. It was common ground that 47 Park Street was a “similar establishment” and that the grant of a Fractional Interest carried with it the right to “sleeping accommodation”. That was not necessarily conclusive: if “sleeping accommodation” is provided as part of a wider supply, Item 1(d) may not apply. On the other hand, Item 1(d), unlike the land exemption, is not to be construed narrowly. Moreover, I cannot see why the FTT should not have been able to have regard to “the length and characteristics of the individual stays to which a member was entitled by virtue of the Fractional Interest acquired” (to quote from paragraph 108 of the UT decision). The fact that Membership gives “the flexibility to enjoy short stays of a stated maximum amount each year, in an environment similar to a hotel and with the services which can be expected in a hotel” (as the FTT observed in paragraph 289 of its decision) was surely something that the FTT could properly take into account in arriving at its assessment. Further, the FTT clearly had in mind the features of FPSL’s supplies which the UT thought took them outside Item 1(d). In particular, there is no question of the FTT having overlooked the matters to which the UT referred in paragraph 95 of its decision. The FTT specifically referred to these in paragraph 282 of its decision (for which, see paragraph 54 above).

As I understand it, the UT concluded that FPSL had supplied “a right which comprises more than something in the nature of short-term accommodation in the hotel sector” on the basis, essentially, that the supply was “of a long-term right”. However, Miss Hall did not suggest that the CJEU has ever held that the grant of a right to short-term sleeping accommodation in an establishment similar to a hotel cannot fall within the exclusion from the land exemption to be found in article 135(1)(l) of the Principal VAT Directive merely because the right is to last for an extended period. Nor does it seem to me that the fact that such a right is of a longterm nature should necessarily preclude application of the exclusion. To my mind, the duration of the right is not of itself determinative but rather a factor which can properly be taken into account.

In my view, it was open to the FTT to consider that the grant of a Fractional Interest, carrying with it rights to “sleeping accommodation” in an establishment similar to a

In short, if I had not concluded that the appeal should be allowed in relation to Issue 2, I would have allowed it on the ground that it was not open to the UT to disturb the FTT’s finding that Item 1(d) applied to the supplies at issue.

I would allow the appeal.