In Blue Chip Hotels Limited v HMRC [2017] UKUT 0204 the Upper Tribunal (UT) found that hiring out a hotel room for wedding ceremonies was not an exempt supply of land for VAT purposes.
- The taxpayer owns a hotel which includes a room that is licensed for civil marriage ceremonies.
- It provides a variety of wedding packages, including use of the room for ceremonies and/or receptions with food and drink.
- In all cases where the wedding room was used the taxpayer treated the hire as an exempt supply of land for VAT purposes.
- HMRC disagreed, arguing that where a customer held both a ceremony and a reception the supply of the room was not exempt and should be standard rated.
The First-tier Tribunal (FTT) originally found that:
- The supply of the room was a separate supply for VAT purposes, even when included in a ‘wedding package’.
- The separate supply of the room was not an exempt supply of leasing or letting of land, but a standard rated supply.
The taxpayer did not appeal the FTT’s conclusion that the hire of the room was a separate supply, but argued that the supply was exempt.
Two issues were identified by the UT as key in determining whether the exemption for the leasing and letting of immoveable property applied:
- Did customers have a right to occupy the room as owner, and exclude any other person from enjoyment of such a right?
- Did the taxpayer add any significant value to the hire of the space so that it was not merely a simple provision of space?
Applying these tests the UT concluded that the supply of the room was outside the scope of the exemption:
- The legal requirement that members of the public must be allowed access during ceremonies doesn't mean customers don’t have exclusivity: any owner would be subject to the same requirement.
- However, the taxpayer did not simply make a room available: they actively exploited the room by obtaining approval for its use as a marriage venue and performing all the required activities to maintain that approval.
- This went beyond what would be expected from mere letting of immoveable property: by its active exploitation of the room the taxpayer added significant value to the supply.
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Case reference: Blue Chip Hotels Limited v HMRC [2017] UKUT 0204
