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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Tallington Lakes Ltd v Revenue & Customs [2007] UKVAT V19972 (09 January 2007) URL: http://www.bailii.org/uk/cases/UKVAT/2007/V19972.html Cite as: [2007] UKVAT V19972

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19972

EXEMPT SUPPLIES – Provision of seasonal pitches – Whether excluded from exemption to VAT - By clause 7 licence precludes occupation during February – Planning permission requirement bars February occupation – Neither clause 7 nor planning permission requirement ever enforced – Whether clause 7 enforceable – If not whether Note 14 to Item 1 of Group 1 of Schedule 9 to VAT Act 1994 applies – Appeal allowed

LONDON TRIBUNAL CENTRE

TALLINGTON LAKES LIMITED Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: MISS J C GORT (Chairman)

MR T A MARSH

Sitting in public in London on 21 October 2005 and 14 November 2006

Mr Neil Morgan, a director of the company, for the Appellant

Miss Nicola Shaw of counsel, instructed by the Solicitor's Office of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. This is an appeal against a decision contained in a letter dated 23 December 2004 not to allow the sum of £128,613 claimed in respect of the period 03/01 to 12/03 by way of voluntary disclosure made on 21 July 2001, and against an assessment for VAT issued on 1 March 2005 in the sum of £16,083 plus interest of £824.63. The issue in both instances is whether pitch fees charged to static caravan owners for the right to site their caravan at Tallington Lakes were subject to VAT at the standard rate.

Background

2. The Appellant owns a property known as Tallington Lakes which is a large area of some 350 acres, 200 acres of which is lake. Originally gravel had been extracted from the site in the 1940s and 50s. In the late 1970s or early 1980s the site was acquired in order to be used for water skiing, and that use continues to this day, although today such use is ancillary. From the mid 1980s the land became used as a caravan site, and planning permission was granted for 385 caravans. At present about 225 caravans are on the site. The issue of planning permission is complicated and it is a matter which we will set out in more detail below.
3. The Appellant operates a leisure complex at Tallington Lakes, and, inter alia grants licences to owners of static caravans to occupy concrete pitches which it provides. It was registered for VAT with effect from 1 January 1982. At some point an accountant working for the Appellant agreed that VAT at the standard rate should be charged on the granting of the licences, and it was in respect of those payments that the voluntary disclosure was made.
4. The pitches are provided to private individuals, each of whom owns his or her own caravan or mobile home. The Appellant is also in the business of selling mobile homes and in addition lets off a small portion of the site for use by touring caravans and campers, for which there are some 70 pitches in a separate area. There are 6 caravans which are rented out for holiday accommodation, which again are treated differently for tax purposes. These are on the same site as the pitches available for touring caravans. There is on this side a shower block and amenities for use by the owners of the touring caravans and the people who rent the caravans from the Appellant, which is near to the office and is under the control of the staff there. The pitches which are the subject of this appeal are scattered throughout an area which is mainly around the lake, along about three miles of road. There is a restaurant and a bar facility in the middle of the site for everybody's use. The mobile homes themselves are anchored by metal straps and chains, and have the towing bar and the wheels removed. They are permanently connected to the electricity mains and to a gas supply. There is a permanent BT connection.

The legislation

5. Item 1 of Group 1, Schedule 9 of the Value Added Tax Act 1994 ("VATA") excepts the grant of any interest in or right over land "other than …

"(f) the provision of seasonal pitches for caravans, and for grant of facilities at caravan parks to persons to whom such pitches are provided."

The term "seasonal pitch" is defined by Note 14 to Item 1, Group 1, Schedule 9 VATA as "a pitch –

"(a) which is provided for a period of less than a year, or

(b) which is provided for a year or a period longer than a year but which the person to whom it is provided is prevented by the terms of any covenant, statutory planning consent or similar permission from occupying by living in a caravan at all times throughout the period for which the pitch is provided."

6. Article 13B of the Sixth Directive which exempts supplies by way of leasing of "immoveable property" provides:

Other exception

Without prejudice to other community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemption and of preventing any possible evasion, avoidance or abuse:

(a) …

(b) the leasing or letting of a moveable property excluding:

(i) the provision of accommodation, as defined in the laws of Member States in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites".

VAT Notice (701/20/04) deals with caravans. Paragraph 4.1 of the Notice provides:

"4.1 What is the liability of a caravan pitch?

Pitch fees or rents received are either exempt or standard-rates. The following table will help you to decide the liability of your supply.

Standard rated	Exempt
Seasonal sites that are provided for a period of: (a) less than a year; or (b) a year or more when both the following situations apply: a restriction (such as the terms of a covenant, planning condition etc.) prevents the caravan owner living in the caravan throughout the year; and the pitch is on a site, or the part of a site, which is advertised or held out for holiday use.	The provision of pitches at; (a) permanent residential caravan parks; (b) sites for travellers; and (c) seasonal sites but only; where the site is not advertised or held out for holiday use; and where the caravan can be used as a principal private residence. (This applies even if it cannot be occupied throughout the year due to a time-related restriction or occupancy imposed by the site owner.)

Pitch agreements impose certain obligations upon site owners such as the construction of pitches, bases and the park infrastructure. If you raise a one-off charge which is directly related to these obligations it will follow the liability of the supply of the pitch.

The input tax that is attributable to these supplies should be determined accordingly."

The evidence

7. Mr Morgan, a director of the Appellant company, gave evidence on behalf of the Appellant. Mr Alec George Woods, a VAT assurance officer and Mr Malcolm James Killock, an appeals officer, gave evidence on behalf of the Respondents. An agreed bundle of documents was produced and in addition Mr Morgan produced a printout of an analysis of caravan plot residency at Tallington Lakes and he submitted approximately 140 forms completed by the people who rent the pitches. The content of this form is set out below. Mr Morgan also served a witness statement of a Ms Valerie Green after the first hearing of the appeal and before the second one. There was no objection by the Commissioners to that witness statement, nor to a further witness statement Mr Morgan submitted on his own behalf. At the resumed hearing of the appeal Miss Shaw informed the Tribunal that, although there had been no objection to either of these witness statements, the content of them was not accepted. Mr Morgan had given evidence and cross-examination had been concluded on the first day of the hearing, nonetheless he agreed to resume the witness stand and submit to cross-examination on the further witness statement.
8. Mr Morgan had completed his purchase of Tallington Lakes in 2004. He found that there was great confusion as to the various planning permissions which had been granted. South Kesteven District Council Environmental Health Services had in the 1980s granted a licence ("the planning licence") pursuant to section 3 of the Caravan Sites and Control of Development Act, 1960, subject to the following conditions:

"1. The total number of static holiday caravan sited shall not exceed 385

2. This licence is issued subject to compliance of the standard South Kesteven District Council Site Licence conditions to static holiday caravans

3. Static holiday caravans shall be sited in accordance with Annex A which forms part of this licence."

This licence had at no time been amended.

9. Annex A sets out the number of caravans which may be sited in the various areas. There are 12 sites listed, and planning conditions are attached to three of those sites, namely: Main Bank, the Island and South Bank. The number of caravans on each site respectively is 56, 26 and 52. However, according to Mr Morgan whose evidence on this we accept, the South Bank site has never been occupied. The planning condition which was attached to all three sites was that: "No caravan on the site shall be occupied between 31 January and 1 March in any year." According to a letter dated 22 March 2004 from a Mr Clift of the South Kesteven District Council Development Control Services, sent to Mr Killock in response to a letter from him dated 15 October 2004, there were only four other planning permissions to which no condition was attached with regard to ceasing occupation during part of the year. This cannot be right, given that Annex A shows nine other sites which do not have planning restrictions. The South Kesteven District Council Site Licence referred to at clause 2 was not produced to us.
10. The planning references are as follows: Main Bank is reference number SK93/0189/75/8, the Island is reference number SK92/1328/75/52 and South Bank is reference SOO/0407/75. The unchallenged evidence of Mr Morgan was that "SK93 indicated that the planning permission was granted in 1993, similarly "SK92" indicated that it was granted in 1992 and "SOO" indicated that the planning permission was granted in 2000. The restriction imposed on those sites was subject to a four-year time limit for enforcement.
11. The occupiers of the site did so under the terms of the "Tallington Lakes Mobile Home Ownership and Annual Plots Licence Terms and Conditions" ("the site licence") which, at clause 7, stated: "The licensee and all persons occupying the mobile home shall occupy the home for private residential purposes only and no trade or business of any description shall be carried out in or from it. In accordance with the planning permission no mobile home shall be occupied during the month of February. The mobile home may be used as a principal private residence." After January 2005 the site licence remained the same other than that the restriction imposed by clause 7 on occupation during the month of February was no longer included. This restriction was omitted to reflect what Mr Morgan considered to be the reality of the situation.
12. The forms completed by the occupiers which Mr Morgan had produced state, inter alia, as follows:

"Tallington Lakes Caravan pitch

Please either delete paragraph 1, or 2, as appropriate.

My family and I use our caravan at Tallington Lakes for what is generally known and accepted to be holiday purposes, as per the below definition.

My family and I use our caravan at Tallington Lakes for private residential use, coming and going as we please, in accordance with a private residential dwelling. We do not use our caravan solely for what is generally known and accepted to be holiday purposes, as per the below definition.

Definition of holiday

Holiday

Noun

(Capital C or Capital U (UK) US vacation) a time, often one or two weeks, when someone does not go to work or school but is free to do what they want, such as travel or relax:

- a camping/skiing holiday

- have you decided where you are going for your holiday this year?

- Patricia is on holiday next week

- how many days holiday do you get with your new job?

- we thought we'd go to France for our summer holiday."

The form is signed and dated and each signatory gives his address. All the completed form have crossed out 1 above. A Mr I Christie has added after 2: "Have always been residential and paid Poll tax since the year 2000".

13. The analysis of the plot residency produced by Mr Morgan shows that some of the occupiers have been there since the 1980s, very many have been there for periods of over ten years, and the majority have been there five years or more.
14. In her witness statement Valerie Green states the following inter alia. She had owned the caravan at Tallington since 1986. Since 1991 she had worked as the general manager there. The permanently sited caravans at Tallington were not used for holiday purposes, and she has always known that they were used for residential purposes. The previous plot licence conditions contained a mistake in that they required caravan owners not to occupy during the month of February. She continued:

"This condition has never been enforced by any member of staff and it has never had any material effect. Residents continued living in their caravan throughout the year including February.

In any event we, (all of the staff at Tallington), actually thought that the restriction was not to sleep in some of the caravans overnight during February. In other words, residents could continue to occupy some of the caravans throughout the day in February, but could not sleep overnight. We always thought that this situation, with apparently some of the residents able to occupy during the day in February but not stay overnight, whilst the remainder of the residents were able to occupy and stay overnight in February, as exceptionally silly. Hence we ignored it and so did all of the residents."

15. Mr Morgan gave evidence to the effect that to his specific knowledge some of the residents remained in the caravan during February. The planning authorities had never enforced the planning limitation on occupation during February, no enforcement action had been taken at any time against any of the occupiers, and nor had the Appellant taken action against any of the occupiers for breach of clause 7 of the licence. Whilst the planning licence applied to all the pitches, the planning restrictions only applied to a small proportion of them.
16. There was a further licence from South Kesteven District Council in respect of part of the site which gave permission for no more than 51 touring caravans to be sited. That licence was dated 29/3/04, it does not apply to all the holiday sites at Tallington Lakes, and it is not relevant to this appeal.
17. The Appellant's website refers to "leisure homes to buy" and the owners receive a discount on the use of the leisure facilities. The homes are marketed as being suitable for those looking for a "well-deserved break or longer stay". The website was described by Mr Morgan as having a twofold function: to attract day visitors and also to advertise the core business which was the sale of mobile homes. Access to the part of Tallington Lakes occupied by the site users is by use of a swipe card both on entry and exit, and therefore, Mr Morgan concluded, the staff would know who was there at any time, and in particular if anyone were staying overnight in February.
18. By a letter dated 9 November 2004 to Mr Woods, Mr Morgan had set out the facts relating to Tallington Lakes. In it he refers to there being 230 static mobile home pitches of which 224 are owned by private individuals. Six of them are owned by Tallington and rented out for separate and distinct holiday purposes. In respect of those six, VAT was charged and paid on any rental. He continued: "The privately owned static mobile homes are positioned for very long periods of time, often in excess of a decade. The frequency and duration of the occupation and use of the static mobile homes by their respective owners obviously varies. Many owners occupy and live within their mobile homes for extended periods, sometimes for many months at a time. Alternatively, for some occupiers their static mobile home at Tallington is their permanent and principal private residence in the UK. Many owners spend most of their time, in any given week, living in their mobile homes. It is both typical and common practice for many owners to arrive at Tallington on a Thursday evening and leave again on a Tuesday morning. The mobile homes are used for long term residential purposes and their respective owners come and go frequently and entirely as they please. The private owners unequivocally do not occupy their mobile homes on a "holiday" basis. The static mobile homes belonging to private individuals at Tallington are used for long term residential purposes."
19. There is planning permission at Tallington for permanent residential pine lodges, some of which have been built alongside some of the mobile homes. The lodges are charged the same ground rent as the mobile home owners, and are occupied and used in the same way as the owners of the mobile homes use them, that is, for long term private residential purposes as the owner sees fit. The holiday usage part of Tallington is far smaller than the residential part, and the proportion of holiday to residential usage in terms of days of occupation in any year is said by Mr Morgan to be less than 4%.
20. His evidence to the Tribunal with regard to occupancy accorded with his letter of 9 November. In addition he said that the pattern for occupation varied considerably and a printout of the website was included in the bundle. It shows a list of activities available at the site, and refers to there being mobile homes to buy and mobile homes to rent as well as camping and caravanning being possible. Activities on the lake are described in full and in addition there is a reference to a children's adventure playground, tennis courts and a five-a-side football pitch. The printout we saw is dated 11 October 2005 (i.e. after the relevant dates) and it states inter alia: "Tallington Lakes is open year round and you may occupy your mobile homes throughout the entire year." It also states: "Park access – the licence fee includes free access to the park and its facilities for the licence holder and immediate family …" There is reference to the standing charge for electricity, gas delivery, sewage/water usage, rates, insurance, the availability of telephone from BT, and the provision of maintenance.
21. Mr Morgan's uncontested evidence was that none of the occupiers of the sites who had applied to renew their site licences had ever been turned down on the basis that they had occupied the site in February. The site licences were renewed annually. It was his unchallenged evidence that, in respect of the site, if any planning condition were not enforced within four years of its being granted, then the use became established and protected. This evidence was in part supported by a letter dated 12 December 2005 from Mr Clift of the local authority which is cited at paragraph 26. below.
22. A summary of the Appellant's trading activities and records which appears to be dated 20 July 1995 contains under the heading "subsidiary business activity": "caravan park : zero-rated residential caravans bought and sold. Site rentals received. Sale of Kawasaki Jet Skis." Under principal outputs : "Membership and day visitor fees. Camping and sporting activities. Various misc. income." Under zero-rated it states: "static caravans and chalets (3)." Under exempt is: "Site rentals – standard-rated w.e.f. 1.4.89. Exempt caravan ins'ce; commissioned." As at 12/87 taxable income is given as £405,000, zero-rated as £205,000 and exempt £60,000. As at 6/89 the figures are taxable £720,000, zero-rated £200,000 and there are no exempt supplies recorded. Mr Morgan pointed to this document as showing that at one time the Commissioners had viewed certain of the Appellant's activities as being zero-rated, and that this had only changed when the accountant for the site who was also running it at the time, a Mr R F Robinson, had agreed to pay standard rated VAT on the site.
23. After Mr Morgan took over control of the site, a Mr H Smith of Customs paid a visit on 27 May 2004. In his audit report he records: "Business has just changed ownership and new owner has decided to switch from a "holiday" site only to part "holiday" and part "residential". These changes will be effective from April 2004 and trading will then become partially exempt … trader has declared all deposits as s/r on period 12/03 but due to changes above had recovered output tax of £16,083 in respect of residential rents (exempt) in period 03/04." Subsequently the Commissioners issued an assessment in respect of the period 03/04 in order to recover that £16,083, and in addition they charged the sum of £842.63 in interest. A voluntary disclosure by the Appellant in respect of the three years preceding June 2004, excluding the sum already recovered as output tax for the period 03/04, was made reclaiming the tax paid in respect of the pitches. It was this voluntary disclosure which resulted in a subsequent site visit being paid by Mr Woods of the Commissioners and the decision being made which was the subject of this appeal.
24. It was Mr Woods' impression that the site was leisure-based, and that it was marketed as a holiday or a leisure site. This was apparently despite the fact that Mr Morgan had written to him in November 2004 setting out the difference between the areas which were distinct for holiday purposes and the static mobile homes which were owned by individuals. Mr Woods had also spoken to a Ms Jones who had told him that there had been no change in the use of the site over the years. As noted above, Mr Smith in his report had said that there had been a change. Mr Morgan's evidence was that there had been no change.
25. Mr Killock of the Commissioners, when reviewing the decision, had written to the local authority to ascertain the situation with regard to planning permission. In cross-examination he accepted that he was confused by the replies he received, and that the local authority had at some point refused to supply further information. Mr Killock had no specialist knowledge of planning permission, and was unable to comment on the matter of whether there was a four-year time limit in which to enforce the planning conditions. In his witness statement he stated: "If however caravans were being used for residential purposes this would be in breach of the terms of the planning permission."
26. We have referred above to the letter of 22 March 2005 in which the restriction on occupation in February was referred to, Mr Clift subsequently wrote in reply to further correspondence from Mr Killock stating that there were four planning approvals which did not have that condition attached (see paragraph 9 above). By a letter dated 12 December 2005 Mr Clift stated that the omission of the planning condition did not alter the use of the site i.e. the use of the land for leisure purposes and the caravans as leisure homes. He referred to two caravan units on site being allowed permanent status for employees of the business and continued:

"According to our records the rest of the caravans on site can only be used for leisure/recreational purposes. We have received no complaints concerning this matter until earlier this year and we were not aware that the site was being used for residential purposes. From a planning perspective, if a number of caravans are being used for residential purposes this is in breach of the planning permission. There is a statutory time limit that the local planning authority can take enforcement action. This is either four or ten years dependent on the breach. …"

Mr Morgan, upon being supplied with the copy of this letter from Mr Clift, had subsequently asked Mr Clift who had made the complaint referred to, and had been told that this was a reference to the inquiries made by Mr Killock on behalf of the Commissioners.

27. Mr Killock was not aware that the South Bank site, being one of the sites to which a restriction was said to apply, did not exist. He would not accept that the planning restrictions in respect of the two other sites were unenforceable owing to the lapse of time since they were imposed, because he considered there may be conditions in respect of the site which extended the time. Mr Killock was unable to explain the summary of trading activities referred to above which give the Appellant's trading activities in 1987, 1989 and 1995 as zero-rated. He considered that the summary should have been struck out because of the note on the report which says: "Site rental – standard rated with effect from 1.4.89". He considered that it was only prior to 1989 that there had been an exemption. Mr Killock had been under the impression that the document showing the number of sites available for caravans had in fact been drawn up by Mr Morgan, which is not the case: it is part of Annex A to the Environmental Health Licence, as is clear from its stating on its face that it is part of Site Licence No.84/2.

The Respondents' case

28. The Respondents' case that the supply of caravan pitches by the Appellant constitutes a standard-rated supply is based on two limbs: first of all the Commissioners rely on clause 7 of the licence issued by the Appellant which states that: "In accordance with the planning permission no mobile home shall be occupied during the month of February." Secondly they rely on the planning condition as set out by the South Kesteven District Council in their letter of 22 March 2005 in respect of three of the sites. The Commissioners concluded that the site was a seasonal/holiday park as opposed to a permanent residential park and was therefore subject to VAT at the standard rate on the rentals. This conclusion is not contained in the Statement of Case, but appears in the correspondence and was put forward by Miss Shaw.
29. In addition to the licence and planning permission, the Commissioners relied on the fact that the Appellant supplied the pitches on an annual basis; the fact that the Appellant paid non-domestic rates on the site and the fact that the site was advertised or held out for holiday use/leisure activities, as shown on the Appellant's earlier website which the Tribunal has not seen.
30. Miss Shaw submitted that the pitches were seasonal pitches within the exemption to 1(f) of Group 1 to Schedule 9 of the Value Added Tax Act and were thereby excepted from the exemption to tax. The pitches in the present case were provided for less than a year, by virtue of both the licence and the planning permission.
31. It was submitted that the "seasonality" test employed by the Commissioners had been expressly approved by the Court of Appeal in the case of Colaingrove Ltd v Customs and Excise Commissioners [2004] STC 712 in which the question was whether or not the United Kingdom legislation complied with Article 13B(b) of the Sixth Directive.
32. A subsidiary point made by Miss Shaw was that, whilst Notice 701/20 did not represent the law, but was a policy statement, nonetheless the Commissioners relied on the terms of the Notice, and it was submitted that the Appellant did not comply with the Notice.
33. In the course of the case the Tribunal asked Miss Shaw whether the validity of the term in the licence precluding the occupation of caravans for the month of February was affected if the Appellant had historically failed to enforce it? Miss Shaw's submissions on that were that the legislation clearly referred to the definition of a seasonal pitch being one "which the person for whom it is provided is prevented by the terms of any covenant, statutory planning consent or similar permission from occupying" throughout the year and here there was such a planning consent, and therefore the pitch was a seasonal one. The Tribunal was referred to the law on waiver and the equitable doctrine of permissory estoppel in the following terms. Where one party to a contract grants a concession or forbearance to the other party by not insisting on the performance of a term of the contract, such a waiver can prima facie be retracted unilaterally because it is not supported by consideration. A party may be prevented from going back on such a waiver in circumstances where it is an unequivocal representation arising from a positive and intentional act done by the party granting the concession with knowledge of all the material circumstances and the other party has acted on it (see Earl of Darnley v London, Chatham and Dover Railway Co (1867) LR 2 HL 43 at 57 and Charles Richards Ltd v Oppenheim [1950] KB 616 at 623).
34. With regard to promissory estoppel it was submitted that this estopped a party to a contract from resiling from an unequivocal promise where the other party has acted to his detriment on the basis of that promise. Waiver only applied to statements of existing fact, whereas promissory estoppel applied to representations as to future intentions. Waiver acted "as a sword" (a cause of action) whereas promissory estoppel only acted "as a shield" (a defence). (See High Trees [[1947] KB 130). It was submitted that the required conditions had not been established. It was suggested that Mr Morgan's evidence was rather vague and that no express waiver or representation had been made. No evidence had been produced from any specific licensees for whom the restriction in the clause was waived that they had had full knowledge of all the material circumstances. Furthermore there was no evidence as to how many of the licensees occupied, or had previously occupied their caravans during February. It was submitted that a vague and general assertion was not sufficient to establish a waiver of the term or an estoppel in relation to all or any of the licensees because there was no evidence in relation to any specific licensee that there was an unequivocal representation by the Appellant which was acted upon by that licensee.
35. Miss Shaw relied on the wording or Note 14 to Group 1 of Schedule 9 of the VATA, and submitted that in any event any waiver or estoppel was irrelevant because VAT legislation must be capable of being applied objectively and transparently. It would be wholly impractical for the Commissioners or the Tribunal to have to look behind the terms of the licence to establish the particular circumstances of each and every licensee to ascertain in respect of what proportion of the licensees the Appellant would be precluded from enforcing the terms of clause 7 if there were a dispute as between the Appellant and that licensee. The VAT legislation must be interpreted in a way which makes it capable of being applied and enforced by the Commissioners and the Tribunal in a way which does not impose a disproportionate administrative burden.
36. The Tribunal asked Miss Shaw what would be the Commissioners' case had all of the licensees come to the Tribunal and said that they had always remained in their mobile homes during the month of February and they had never known clause 7 to be enforced. Miss Shaw answered that the Commissioners considered that the legislation did give effect to its purpose and properly drew a distinction between dwellings and other forms of accommodation, and the definition of seasonal pitches was intended to earmark types of lettings which were restricted in parts of the year.

The Appellant's case

37. Mr Morgan asked the Tribunal to take a broad view of the purpose of VAT legislation and referred the Tribunal to the case of Colaingrove (supra) in which Lady Justice Arden considered the opinion of Advocate General Jacobs in the case of Blasi v Finanzamt München I (Case C-346/95) [1998] STC 336, in which at paragraph 16 he said:

"However, while generally exempting the leasing or letting of immoveable property, Art 13B(b) also provides for exclusion of certain transactions from exemption. The common feature of those transactions is that they entail more active exploitation of the immoveable property justifying further taxation in addition to that levied upon its initial sale."

At paragraph 13 Lady Justice Arden said:

"Thus the policy underlying the exemption of a letting of property is to exclude from VAT transactions which involve simply the long-term, passive occupation of property rather than economic activity. After land has been developed, it is usually simply enjoyed. However, this is not necessarily the case. Where it is let for holiday or storage purposes, there would, in my judgment, be a `more active exploitation' of the property."

38. Mr Morgan submitted that VAT only arose where property was being exploited and there was an ongoing economic activity. He fully accepted that holiday accommodation was seasonal and was an on-going activity which should be liable for VAT, but the sites themselves were passively occupied and not actively exploited. The Appellant relied on the exception to the exemption in Schedule 9 Group 1 Note 14, and it was submitted that, despite clause 7 in the licence, the occupiers were not prevented from occupying their caravans at all times throughout the period of the licences, which were annual. Mr Morgan submitted that we should look at the reality of the situation, which was that clause 7 had never been enforced throughout the lengthy period which it had been present in the licences, and that, were action to be taken by the Appellant to enforce it, such action could not possibly succeed because of the acquiescence by the Appellant in the non-compliance, and also by virtue of the substantial non-compliance by other occupiers of the site.
39. In addition Mr Morgan relied on the Customs and Excise Notice 701/20 which at 4.1(c) exempted from the standard-rating provisions seasonal sites where the caravan can be used as a principal private residence and which then in turn stated that this applied "… even if it cannot be occupied throughout the year due to a time-related restriction or occupancy imposed by the site owner." He pointed out that the terms of the licence showed that the caravans could be used as a principal private residence, and as a matter of fact they were. He submitted that he was entitled to rely on Notice 701/20 which had never been amended or replaced.
40. With regard to the planning permission, it was submitted that although there had been in the past restrictions on occupation of the site during the month of February, not only did this only apply to two of the sites which were in use, and therefore to only a minority of the site, but also the condition had never been complied with and there had never been any enforcement action taken in respect of this breach. Any action would now be time-barred.
41. The Appellant asked the Tribunal to take a common sense approach to the case. We were invited to take account not only of Mr Morgan's own evidence as to the occupancy of the caravans throughout the year and the non-enforcement of clause 7, but also to take account of the evidence of Valerie Green, and of the fact that on two previous occasions Customs had taken the view that the caravans were residential. The first occasion was in 1988 when Customs' records state: "… caravan park: zero-rated residential caravans bought and sold. Site rentals received …". This appeared in the "Summary of Trading Activities and Records", an internal Customs document. In respect of this the Tribunal's attention was drawn to the fact that static caravans are, at the point of sale, themselves zero-rated for VAT purposes on the basis that they are to be used as a dwelling. It was only because the Appellant's accountant had erroneously acquiesced to Customs' demand that the residential usage should be standard-rated that the present situation had arisen, the change had not been made by the Appellant's management. The same accountant had been responsible for the wording in the original plot licence conditions which had continued until 2005. The second occasion when the Commissioners had taken the view that the sites were residential was in 2004 when the Customs provided a refund of overpaid VAT arising out of the residential caravan plot fees, by way of a cheque to the Appellant in the sum of £15,339.21.
42. In his written submissions Mr Morgan raised a preliminary issue, namely that what was provided by the Appellant was no more than slabs of concrete, buried in the ground. These were continuously and passively occupied by the respective owners of the caravans. Slabs of concrete themselves could not amount to holiday accommodation as they were quite obviously not provided for that purpose, and were permanent and passive structures on the land. The Respondents required the Appellant to deal with how its customers actually occupied their respective caravans, not how the customers occupied the dormant slab of concrete that was actually supplied and charged for. The Appellant failed to see how it could have any interest in, or influence over, let alone liability for, the manner in which these slabs were ultimately used by the owner of the caravan. This point was not pursued by Mr Morgan at the hearing of the appeal, and nor was any response made to it by the Respondents.
43. The Tribunal was referred to the case of Ashworth 1994 [VATTR 275]. That case concerned a couple who occupied a property under the terms of a 99 year lease which had a restriction on occupancy of the property in the month of February. The couple had always left the property in February. They had always paid council tax on the basis that it had been their sole and main residence. Customs and Excise issued a decision that the rent and service charges were taxable at the standard rate. Exemption was refused on the basis of the prohibition of occupation during February each year contained in the lease. The Tribunal had allowed the appeal. It was submitted that that case was authority for the proposition that if a person does not occupy a site for a brief period, that did not render it unseasonal and therefore, notwithstanding the occupancy restriction, the site could still be exempt.
44. The Tribunal was also referred to the case of Colaingrove (supra) and it was submitted that that case was factually distinct from the present case in that it concerned a situation where people were prevented from occupying the relevant site for three months each year, which was clearly seasonal. It was unreasonable of the Commissioners to use the word "seasonal" to mean any fraction of time, no matter how small, in any given year. It was submitted that "seasonal" meant that you did not use something for certain periods of the year, or seasons of the year. A caravan not used in autumn, or winter, was one whose use was seasonal.
45. In addition the Appellant did not accept the Respondents' reliance on the wording of the Environmental Health Licence which referred to the licence being for "static holiday caravans". Mr Morgan submitted that an environmental health licence was not obligatory, it was simply permissory. The licence made no statement whatsoever as to the status or use of the site, and any such interpretation was erroneous and inapplicable. The existence of the environmental health licence was due to a long term misunderstanding and confusion as the actual status of the site. It could not change the factual reality.
46. It was submitted that the Respondents were confusing "holiday homes" with "holiday accommodation". Holiday accommodation, as defined by VATA 1994 Schedule 9, Group 1, Note 13, clearly applied to accommodation provided by way of short term rental for the person on holiday. The thrust and purpose of the law was to render VAT payable on the provision of holiday accommodation, this had been extended by the Respondents to those who simply chose to live in a caravan. This went well beyond the provisions of the legislation.
47. With regard to the planning permissions, these were permissory not obligatory. The reality was that for about 20 years the vast majority of the caravans at the site had been used for residential purposes (as evidenced by the original classification of the park by Customs and Excise) and this was known to the local authority. The licence terms at all times made clear that caravan owners could use their caravans as their principal private residence, and many did.

Decision

48. We consider that the only question with which we are concerned in this appeal is whether the exception to the exemption contained in Item 1(f) of the Schedule applies. Nonetheless, since the point was raised by Miss Shaw as to whether or not the sites were held out for holiday or leisure purposes, we will deal with this matter at the outset. Mr Morgan's evidence was that, whilst part of the site was so marketed, and is in fact a holiday or leisure site, the areas with which we are concerned are not, and were not, so marketed, and are not in fact a holiday or leisure site. We have only seen the more recent website, but we nonetheless accept his evidence as to the marketing at the relevant time of the site. Whilst the Environment Health Licence gives permission for "static holiday caravans" this cannot by itself be determinative of whether or not the pitches are seasonal pitches or not.
49. We find as a fact that clause 7 of the licence, insofar as it relates to a restriction of occupation during the month of February, was at no time enforced by the management at Tallington Lakes, and that a very large number of the occupiers of the pitches treated the mobile homes as their private residence at the relevant time. Clause 7 gave the occupiers specific permission to treat the mobile homes as their principal private residence. The precise wording of the restriction contained in clause 7 is important: "In accordance with the planning permission no mobile home shall be occupied during the month of February" (emphasis added). We accept Mr Morgan's evidence that at no time had the local authority attempted to enforce the condition imposed by the Environmental Health Licence relating to occupation during February. Mr Clift's evidence, contained in his letter of 12 December 2005, was clear: there is a statutory time limit in which the local planning authority can take enforcement action, and that is either four or ten years after the imposition, dependant on the breach. A restriction had been imposed on the site known as "South Bank" in 2000, but we accept Mr Morgan's evidence that this is a site which has never been occupied, and therefore it cannot be relevant to this appeal. It was Mr Morgan's unchallenged evidence that the breach in the present case is subject to a 4-year period for enforcement action to be taken, and that the local authority has for many years been aware of the residential use by the occupiers, therefore neither of the two sites subject to the restriction would still have been subject to it at the start of the period with which this appeal is concerned, namely 03/01, the relevant restrictions being imposed in 1992 and 1993. Whilst no submission to this effect was made, we consider it likely that any breach of the planning conditions would have to have been known about, actually or constructively, by the local authority for time to start running. In addition to Mr Morgan's evidence, we have the evidence of Mr Christie (see paragraph 12 above) that he had `always been residential' and paid `poll tax' (sic) since he arrived in 2000. Although if he were the only occupier to do so, this would allow the Council until 2004 to take enforcement action, no such action has been taken to date. Furthermore we find it completely improbable that, given the sheer number of occupiers who say that they have occupied their pitches as a private residence, and the length of time so many of them have been there, that the Council could claim to have been unaware of the residential use to which the pitches were put and this would have put the Council on notice about the possibility of their being occupied during February. We find that on the balance of probabilities, the condition has lapsed and the local authority must be deemed to have acquiesced in its lapse.
50. With regard to clause 7 of the licence, had the Appellant taken enforcement action against any particular occupier during the relevant period, it is most unlikely that the action would have succeeded, given that it would have been met with the argument that there had been a voluntary agreed variation on both sides, as evidenced by the fact that no action had previously been taken against any occupier. It would also have been met by the argument that clause 7 on its face declared the restriction to be in accordance with the planning permission, and, as the planning permission could no longer be enforced, so the restriction was no longer valid. The matter therefore for us to decide is whether the existence of the restriction set out in the planning permission and the licence, neither of which could be enforced successfully, is sufficient to bring the Appellant within the exception to the exemption contained in Schedule 9.
51. Miss Shaw submitted that it was not for either the Commissioners or the Tribunal to examine the position of each and every occupier of each and every site, such a task being too onerous. Without deciding that point, we consider it not to be relevant in the circumstances of this case. The planning permission restriction was only imposed in respect of two relevant sites, and applied to only 82 out of 251 relevant mobile homes. (We have excluded the 52 mobile homes for which planning permission was given on the South Bank from the overall total of 385 referred to at Annex A. We have no details as to the specific sites of the 225 mobile homes currently at Tallington Lakes.) If we were to accept Miss Shaw's argument, as the majority of the mobile homes were not subject to the limitation imposed by the planning permission, it could not be right for the Commissioners to determine the matter against the majority on the basis that a minority were at one time subject to a planning restriction which prevented the application of the exemption. All the sites were subject to the restriction in the licence, but, in the case of the majority, that clause was ineffective ab initio, the restriction being imposed by reference to a planning restriction which did not apply to them. In the circumstances we consider that neither waiver nor estoppel is applicable.
52. In the case of Ashworth (supra) Mrs Ashworth's occupation of premises had been by virtue of a lease which contained a restriction on occupation during the month of February. Mrs Ashworth had always complied with that condition. The Tribunal initially had decided against the appellant on the point as to whether a house may be a person's principal place of residence where there is a restriction on the number of days in which a person may reside in it, and had considered that the supply to Mrs Ashworth was excluded from the exemption to tax. It was only later, when considering the facts of the case in the light of article 13B of the Sixth EC Directive, that the appeal was allowed on the basis that the UK legislation was not compatible with the Sixth Directive.. The case is therefore not relevant to this appeal, and neither party can derive much support from it as it is distinguishable both on its facts, and by virtue of the fact that it was concerned with the interpretation of item 1(e) of Schedule 9 of the VAT Act not (f).
53. In the case of Colaingrove Ltd (supra), relied on by both parties, the issue was similarly whether or not the United Kingdom legislation complied with article 13B(b) of the Sixth Directive, and therefore it, too, is not directly on the point. However, the Court of Appeal in that case considered the rationale of the exemption. At paragraph 37 Lady Justice Arden stated: "… I would accept that the test of seasonality in the case of Static Caravan licences meets the test of reasonableness: it seems to me to be a reasonable way of identifying caravan sites which are let for holiday purposes, that is, not for dwelling purposes. The exclusion of such property from the lettings exemption is consistent with the rationale of the exemption." In that case the owners had not been permitted to live in their caravans as a permanent address, nor could they stay overnight during the three month from December to February. The case is clearly distinguishable from the present one on two bases: here clause 7 of the licence specifically states that the mobile home may be used as a principal private residence, and secondly the exclusion in the present case is for one month only, and not for the three months with which the court was concerned in the case of Colaingrove. However, the latter distinction would not suffice the Appellant, and we do not consider it to be a relevant distinction.
54. At paragraph 38 Lady Justice Arden continued: "As I have said, the objective of the exclusion of seasonal pitches in the present case is to exclude lettings for non-dwelling purposes, and in my judgment, this is consistent with the rationale of the lettings exemption. … the jurisprudence of the Court of Justice emphasises the breadth of the tailpiece Member State option. It follows that the exclusion of the letting of seasonal pitches for caravans, which are unlikely to be occupied on such pitches as a person's main residence and indeed in the present case are not permitted by the licensor to be so occupied, is not incompatible with the Sixth Directive." The Court does not go on to consider what the effect would be in the present circumstances where the site licence specifically allows residential use. Whilst we bear in mind Lady Justice Arden's analysis at paragraph 13 of the case, relied on by the Appellant and cited above, we do not consider that it is open to this Tribunal to determine the appeal on the basis of the principles underlying the legislation, rather than the terms of the legislation itself. We do however consider that the Tribunal should concern itself with the facts of the case in front of it, and not with any hypothetical planning matter which might arise in the future. In this case we, as stated above, find that there was no longer any planning permission in operation during the relevant period, such planning permission restrictions as may have been applicable, were no longer enforceable and in any event only applied to a minority of the sites. With regard to the site licences, whilst these clearly were potentially relevant to all the sites at the relevant time, we do not consider that they can have any present relevance, given both that the restriction specifically refers to the conditions of the planning permission (which are no longer applicable) and in any event was at no time enforced against any of the occupiers. The effect of the lapse of the planning condition is that, whilst the words remain on the local authorities' records, it cannot be said that the occupiers of the pitches are prevented by the planning consent or the site licence from occupying their caravans, as would be required by Note 14 for the exception to the exemption to be effective.
55. Whilst Miss Shaw is correct to say that Notice 201/20 does not represent the law, we consider it unfortunate, to say the least, that taxpayers are still being issued with a Notice which the Commissioners say does not represent their position. In the present case we find that the Appellant has in fact complied with the requirements of the Notice, given our above finding that it is not (where relevant) a holiday site. No submissions on the issue of unjust enrichment were made to the Tribunal. In all the circumstances for the above reasons we allow this appeal in full. However, if we are wrong as to the lapse of the planning restriction, we would in any event have allowed the appeal in relation to that proportion of the sites to which the planning restriction has never been applicable, and in respect of which therefore clause 7 could never in any circumstances have been enforced.
56. The Appellant's costs to be paid by the Respondents, with liberty to apply to the Tribunal in the absence of agreement.

MISS J C GORT

CHAIRMAN

RELEASED: 9 January 2007

LON/05/177