20783

VAT – ZERO RATING – SINGLE/MULTIPLE SUPPLIES – supplies of a wedding book by professional photographers – the wedding book was a wedding album for all intents and purposes -  not a book within the meaning of the zero-rating provisions – alternative issue – single supply of goods/services or multiple supply of goods and services – single supply of standard rated photographic services – Appeals dismissed  

MANCHESTER TRIBUNAL CENTRE

	RISBEY’S PHOTOGRAPHY LIMITED	Appellants
DIGITAL ALBUMS LIMITED 
	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      WARREN SNOWDON JP (Member)	  

Sitting in public in North Shields on 3 June 2008

Andrew James Risbey director for the Appellants

David Mohyuddin counsel instructed by the Solicitor’s office for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION
The Appeal
1.	Risbey’s Photography Limited was appealing against an assessment for VAT dated 22 March 2006 in the sum of £41,078 plus interest. Digital Albums Limited was appealing against an assessment for VAT dated 19 March 2006 in the sum of £9,952.
2.	We decided to hear the Appeals together. The directors were the same for both companies which operated from the same premises. Digital Albums Limited was an offshoot of Risbey’s Photography Limited providing dedicated supplies to professional photographers.  The witnesses, the facts and legal arguments were common for both Appeals. The parties supported the decision to hear the Appeals together.
The Dispute
3.	The Risbey family have been involved with professional photography since 1912. The present directors of the Appellants were father and son. The Appellants were separately registered for VAT. Risbey’s Photography Limited was a general photography practice supplying photographic services to the general public, whereas the supplies of Digital Albums Limited were targeted at professional photographers. Six employees were shared by the Appellants which operated from premises in Darlington.
4.	Wedding photography was the principal area of work for the Appellants’ businesses, constituting about 70 per cent of the sales of Risbey’s Photography Limited. The businesses have undergone a complete transformation, moving to a total digital operation. The advent of new technology enabled the Appellants to produce weddings books with printed pages and leather bindings. Risbey’s Photography Limited provided a complete package of photography services including the wedding book. Digital Albums Limited, on the other hand, compiled a wedding book from photographs supplied by other photographers, which they sell onto their customers.
5.	The dispute concerned two separate issues expressed in the alternative by the Respondents:
(1)	Whether the supply of wedding books  was zero-rated within item 1 group 3 schedule 8 VAT Act 1994 ?
(2)	Whether the supply of wedding books was part of a single supply of standard rated wedding photography services?
The Law
6.	Section 30 of the VAT Act 1994 provides that
 (2) A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 8 or the supply is of a description for the time being specified.
7.	Item 1 group 3 schedule 8 of the VAT Act 1994 zero rates supplies of books, booklets, brochures, pamphlets and leaflets. Item 3 zero rates children’s picture books and painting books.
The Evidence
8.	We heard evidence from Andrew Risbey, a director, who set out the details of the Appellants’ businesses. Mr Andrew Risbey was assisted by his father, Derek Risbey, and a family friend, a Paul Galloway.
9.	Steve Pendlington, the assessing officer, Margaret Hutchings, who carried out a reconsideration of the assessment and Heather Gibbs of the Appeals team who reviewed the assessment, gave evidence for the Respondents. The Appellants initially raised objections to the reception of the Officers’ evidence. They withdrew the objection after the position was explained to them.
10.	We received two bundles of documents in evidence. The Appellants also supplied an example of a wedding book.
The Facts
11.	Risbey’s Photography Limited offered a unique wedding service with special flexibilities and freedom of choice. The service started with a pre-wedding conference at which Risbey’s would discuss with the customer the arrangements for photographing the wedding. On the day of the wedding Risbey’s would attend the bride’s home and the wedding venue. Risbey’s suggested a period of three hours for taking the wedding photographs. After the wedding Risbey’s presented the photographs to the customers and their families at a wedding viewing held at their premises. The images were then put onto a website for viewing, using a secure browser. On its website Risbey’s Photography Limited stated that it offered as part of the service the best in both traditional and modern wedding albums, especially the new style wedding books.   Mr Andrew Risbey, however, explained that Risbey’s Photography Limited no longer supplied traditional wedding albums but it retained the term wedding album on its website as a marketing tool, being a term recognised by its customers. Risbey’s Photography Limited charged a single price for the service which included the wedding book.
12.	Under the terms and conditions of the contract for photography services Risbey’s Photography Limited was granted complete artistic licence in relation to the poses photographed and locations used. It held the copyright in the images produced, and retained ownership of the negatives and digital files. The customer indemnified Risbey’s Photography Limited against any third party claims in respect of presented material for incorporation in the wedding book.
13.	The wedding book consisted of images of the wedding day with accompanying text, which usually comprised the marriage vows, readings and speeches given at the wedding, and well known pieces of writing appropriate to the occasion. Risbey’s used standard printing paper (230 gm) for the book. The pages were bonded together using a series of glues producing relatively rigid flat thick pages which were rounded at the edges to stop burring and added longevity. The inside cover was then bonded to the outside cover made by traditional techniques of cardboard cover wrapped in leather with metal corners. The word wedding was stamped on the outside cover.
14.	Mr Andrew Risbey supplied an example of a wedding book which was 211mm by 165mm with a black leather cover. The book consisted of twenty pages made from card. The first page was blank and acted as an inside cover. The next page recited the names of the persons married, the date and location of the wedding. The following 17 pages were dominated by images of the wedding, with seven pages having no text, six pages having four or less lines of text. Two of the remaining pages had a full page spread of text.  The text chosen generally celebrated marriage and the love of two people. In the example supplied the text was not specific to the actual event.
15.	According to Mr Andrew Risbey the customer generally provided about 50 per cent of the text for the wedding book. Risbey’s Photography Limited chose the pictures for the book. The customer would be responsible for checking a proof for spelling mistakes and confirming the digital page layouts. The book told the story of the wedding day. Once bound it could not be altered and represented a permanent record of the event. 
16.	The wedding couple commissioned the book. Risbey’s Photography Limited included the book within the overall supply of wedding photography to the couple. It would provide extra copies of the wedding book or different versions of it for friends and family if paid for by the customer. The wedding books were not on sale to the general public and did not have an ISBN number.
17.	Digital Albums Limited supplied professional photographers with a wedding book. The supply involved designing the book using the photographs supplied by the photographer. Digital Albums offered a photographic retouching service as part of the supply. The photographer retained a limited right to manipulate the pictures incorporated in the book.  The photographer did this by indicating his preference pictures on the order form. The photographer could submit text for the book or select verses from the extensive range held by Digital Albums. The text passages could be left out if the bride and groom felt that the text was a little bit too much.  The price charged for a wedding book was approximately half the fee charged by Risbey’s Photography Limited for the full wedding service.
18.	The Appellants supplied a copy of Wall and Piece by the graffiti artist, Banksy, published by Random House with an ISBN number. The book essentially was a collection of illustrations which showed examples of the artist’s work. The Appellants relied upon the publication to demonstrate that a book did not require text.
19.	The Appellants stated that initially the wedding book was put together by an outside contractor, Hammonds, which did not charge VAT on their binding services.
Reasons for the Decision
Zero-rating Dispute
20.	The Appellants contended that their wedding books were handmade, bound with a hard back cover containing pages of images and text which provided a permanent record of a wedding event. In their view the wedding book had all the physical characteristics and functions of a book which met the zero-rating requirements. The Appellants considered that the wedding book was not a wedding album. They pointed out that an album was not a permanent record of the event. It was possible with an album to take out photographs and insert new ones. 
21.	The Respondents, on the other hand, submitted that the wedding book did not share the same physical characteristics of a book, in particular the pages in the wedding book were significantly thicker than pages normally found in a book. The function of the wedding book was to display photographs of the wedding. The text inserted conveyed no information outside the context of the wedding and had no value in its own right. The wedding book served the same purpose as a wedding album which was a standard rated supply. The wedding book was a reflection of advances in photography and represented a digital form of the wedding album. The wedding book had no value outside those persons immediately involved in the wedding. The wedding book was individually commissioned and not available for sale to the general public. The wedding book did not have an ISBN number. The Respondents contended that it did not fall within the meaning of book in schedule 8 of the VAT Act 1994. 
22.	Item 1 group 3 schedule 8 of the VAT Act 1994 does not define book. May J in Customs and Excise Commissioners v Colour Offset Limited [1995] STC 85 considered the meaning of book in the predecessor legislation schedule 5 of the VAT Act 1983. May J stated at page 89:
“In my judgment, the English word 'book', although it always refers to an object whose necessary minimum characteristics are that it has a significant number of leaves, now usually of paper, held together front and back by covers usually more substantial than the leaves, is a word with a variety of possible more particular meanings. For any particular use of the word, its particular meaning will be derived from the circumstances in which it is used. For instance, if a barrister in the clerks' room of his chambers points to a blank counsel's notebook and says to his clerk 'please hand me that book', he would not expect the answer 'that is not a book'. (Mr Tallon surprisingly submitted that a counsel's notebook might not be a book because it was perforated--a point which he also made in relation to a cheque book.) On the other hand if the same counsel, having a substantial collection of law reports and legal textbooks in his room, asked the same clerk to count all the books in his room, he would not expect the clerk to include blank counsel's notebooks in the count. If a testator uses the word 'books', the word obviously has to be understood in the context of the objects which the testator in fact has to bequeath.
In the first instance, the only circumstance here is that the words 'books' and 'booklets' are used in the Schedule to a statute. They are accordingly relevantly devoid of context. Devoid of context, in my judgment the ordinary meaning of the word 'book' is limited to objects having the minimum characteristics of a book which are to be read or looked at. (The same applies to 'booklet', which I think is a thin book perhaps with a rather flimsy cover. I am not sure about the Shorter Oxford English Dictionary definition of booklet as 'a tiny book', since I would not myself call a tiny book with many pages a booklet.) If you ask of a particular object 'is this a book?' you immediately provide a context, which the words in the statute lack. You will get an answer which is affected by the context. If you ask instead what I regard as the right question here, ie 'what is the ordinary meaning of the word "book"?', you should get an answer which accords with the ordinary meaning to which I have referred. As Mr Richards submitted (although he accepted that these diaries and address books might be books or booklets within one possible meaning of those words), people generally think of books as things to be read rather than as blank pages bound together. A filled-in diary of historical or literary interest may be a book because it is retained to be read or looked at. But a blank diary is not a book in the ordinary sense of the word. Likewise a blank address book is not in the ordinary sense a book and it does not become one simply because its name includes the word 'book'. A cheque book is plainly not a book nor, in my view, is it a booklet in the ordinary sense of that word. The fact that in some contexts you would say of a blank diary that it is a book within one possible meaning of that word does not mean that it is a book within the ordinary meaning of the word.
There is in my view no reason for reading the words 'books' and 'booklets' in item 1 of Group 3 of Schedule 5 to the 1983 Act in a more extended meaning than their ordinary meanings. I agree with Mr Richards that, if they were to be seen in the context of the words with which they are associated, that association would confirm the ordinary meaning. It would not extend it”.
23.	 The VAT & Duties Tribunal decided in Donald Arthur Draper v The Commissioners of Customs and Excise (27 April 1981), unpublished, that a wedding album was not a book within the meaning of the VAT legislation. The facts of the  case concerned a bound album of wedding photographs which was printed and produced by Mr Draper.
24.	The Appellants’ wedding book shared many of the physical characteristics of a book, in that it has leaves of paper bound together within a hard cover. We would, however, agree with the Respondents’ observation that the pages were thicker than what would normally be found in a book. We consider that the wedding book was a pictorial record of a wedding which was of interest only to the persons immediately connected with the event. The text in the wedding book did not convey information and had no value in its own right, which could be deleted if the bride and groom did not want it. The Appellants marketed the wedding book on their websites as a wedding album. The fact that the pictorial record of the wedding book was permanent and could not be altered after publication did not, in our view, alter the fundamental character of the book as a wedding album. The Appellants’ wedding book was a consequence of advances in photographic technology which increased the range of physical manifestations of wedding albums. We find the term wedding album should not be restricted to a traditional form which allowed the removal and insertion of photographs. Such a restriction would be contrary to the Community principle of equal treatment which ensures that similar goods in competition with each other, are not treated differently for the purpose of value added tax. We conclude that the Appellant’s wedding book was to all intents and purposes a wedding album. 
25.	We find that the Appellants’ wedding book did not come within the ordinary meaning of a book. The wedding book in essence was a collection of photographs which was of interest only to the persons immediately connected with the wedding. The text included in the book was optional, and if incorporated did not convey information and had no value in its own right. The functional characteristics of the wedding book as a wedding album outweighed its physical similarities to a book. We hold that the Appellants’ supplies of a wedding book were standard rated for VAT purposes. 
Single Supply
26.	The Respondents’ alternative case was that the Appellants’ supplies were a single supply of photographic services which was standard rated for VAT purposes.
27.	The Court of Justice in Card Protection Plan Ltd v Commissioners of Customs and Excise (Case C-349/96) is the leading judgment on whether a supply is a single or multiple supply.  The Court of Justice held that
“In determining what the appropriate criteria were for deciding, for VAT purposes, whether a transaction which comprised several elements was to be regarded as a single supply or as two or more distinct supplies assessable separately, it was necessary to ascertain the essential features of the transaction. There was a single supply where one or more elements constituted the principal service and others were merely ancillary, in that they did not constitute for customers aims in themselves, but simply a means of better enjoying the principal service. Where a single price was charged for a service consisting of several elements, if circumstances such as those in the instant case indicated that the customers intended to purchase two distinct services, namely an insurance supply and a card registration service, it would be necessary to identify the part of the single price which related to the insurance supply, which would remain exempt in any event. The simplest possible method of calculation or assessment should be used for that purpose. It was therefore for the national court to determine, in the light of those criteria, whether transactions such as those performed by CPP in the instant case were to be regarded for the purposes of VAT as comprising two independent supplies, namely an exempt insurance supply and a taxable card registration service, or whether one of those two supplies was the principal supply to which the other was ancillary, so that it received the same tax treatment as the principal supply”.
28.	Although it was necessary for the Tribunal to determine whether the Appellants’ supplies were single or multiple supplies, the principal dispute between the parties was the identity of the principal supply. The Appellants contended that they were making a single supply of wedding books. The Respondents disagreed, the Appellants were supplying photographic services, the supply of the wedding book was ancillary to and a means of better enjoying the photographic services. 
29.	There were three possible outcomes in this Appeal: a single supply of goods (wedding book), a single supply of services (photographic services) or a multiple supply of services and goods. The determination of the correct outcome for this Appeal would turn on the circumstances in which the transactions took place.
30.	We make the following findings of fact on Risbey’s Photography Limited’ supplies :
(1)	The customer engaged Risbey’s Photography Limited to provide photography of a wedding .
(2)	Risbey’s Photography Limited marketed its wedding supplies as a unique wedding service with special flexibilities and freedom of choice, 
(3)	The wedding supplies were sold as a package for which the customer paid a single price.
(4)	The wedding package sold by Risbey’s Photography Limited consisted of making arrangements for the photography, the taking and viewing of the photographs, and a wedding book displaying selected photographs of the wedding.
(5)	 The supply of the wedding book was entirely dependent upon the photographs being taken in the first place. It was not possible to purchase the wedding book separately from the taking of the photographs.
(6)	Risbey’s Photography Limited retained the copyright in the photographic images included those reproduced in the wedding book. The negatives and digital files remained the property of Risbey’s Photography Limited.
(7)	Risbey’s Photography Limited designed the wedding book using digital technology.
31.	We hold on the above facts that Risbey’s Photography Limited made a single supply of photographic services. The wedding book was ancillary to and a means of better enjoying the photographic services.
32.	The circumstances surrounding the supplies of Digital Albums were different from that of Risbey’s Photography Limited in that it did not provide the photography for the album, and the supplies were commissioned by an outside photographer on behalf of the wedding couple.
33.	We make the following findings of fact on the supplies made by Digital Albums:
(1)	The customer (outside photographer) commissioned an individual piece of work from Digital Albums for which he paid a single price.
(2)	The wedding album was made up of photographs supplied by the outside photographer.
(3)	Digital Albums applied digital photographic processes to the materials supplied to produce the wedding book.
(4)	The outside photographer retained the copyright in the photographs.
(5)	The layout of the wedding book and the photographs included were approved by the customer (outside photographer).
34.	We find that Digital Albums designed a wedding book to the order of a particular photographer by assembling the photographs supplied with the use of photographic processes. We conclude on balance that the supplies of Digital Albums were a single supply of photographic services.
The Decision
35.	In view of our findings of fact we decide that
(1)	The wedding book was not a book within the meaning of Item 1 group 3 schedule 8 of the VAT Act 1994. Thus the Appellants’ supplies of a wedding book were standard rated for VAT purposes.
(2)	In the alternative, the Appellants’ supplies were single supplies of photographic services which were standard rated for VAT purposes.
(3)	The assessments dated 22 March 2006 in the sum of £41,078 plus interest (Risbey’s Photography Limited) and dated 19 March 2006 in the sum of £9,952 ( Digital Albums) are upheld. 
36.	We, therefore, dismiss the Appeals and make no order for costs.

                            

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 22 August 2008

MAN/07/1114 & 1115