ZERO-RATING – Whether supply by Appellant to retailer for onward supply to client of timeshare interest in houseboat is properly zero-rated – Nature of supply – Whether supply of possession of houseboat – Whether nature of supply determined by documents – Group 9 of Sch 8 and Sch 4 para 1(1) of Value Added Tax Act 1994 considered – Appeal dismissed
LONDON TRIBUNAL CENTRE
CANALTIME DEVELOPMENTS LTD Appellant
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: MISS J C GORT (Chairman)
Sitting in public in London on 30 October 2003, 11 & 12 February 2004
Mr Richard Barlow of counsel, for the Appellant
Mr Andrew O'Connor of counsel, for the Respondents
© CROWN COPYRIGHT 2004
DECISION
- This is an appeal against the Respondents' decision that the Appellant's supplies are standard rated for VAT purposes.
- The matter was complicated by a misunderstanding by the Respondents of the nature of those supplies.
- By a letter dated 23 March 2001 W J B Chiltern, acting on behalf of the Appellant, had written to HM Customs and Excise and asked them to confirm, inter alia, that the `sale of the timeshare interest by my client to the retailer/marketer' was zero-rated. Further correspondence ensued in which various questions were asked and answered, in the course of which Customs and Excise lost sight of the nature of the relevant transaction as outlined in the letter of 23 March, and they proceeded on the basis that there was no intermediary between the Appellant and the purchaser of the timeshare. By a letter dated 3 September 2001 Customs and Excise informed the Appellant's representative that the supplies were of "holiday accommodation" and were therefore standard-rated. By that letter the Appellant was given the opportunity, and indeed was asked to provide further information, in particular the representative was asked:
"What supplies are made by the owner(s) i.e. timeshare/charter/period at rentals etc. Please provide documentary evidence to support this."
He was also asked to provide examples of how the "timeshares" were marketed. In response the representative said that the supplies being made were "those of timeshare ownership comprising single or multiples of weeks" and enclosed a Canaltime houseboat brochure together with legal agreements.
- By an undated letter the Respondents confirmed that they were still of the opinion that the supplies were standard-rated; that letter was written on the basis that the supply being made was one of timeshare. It is this letter which is referred to in the statement of case as containing the decision which was the subject of the appeal. The notice of appeal states that it is an appeal against: "The liability of the supply of timeshare accommodation in houseboats." The grounds are given as: "The sale of timeshares in houseboats are correctly zero-rated under Item No.3 Group 9 Schedule 8 VATA 1994 and not standard rated as holiday accommodation as contended by Customs and Excise. The appeal lies by application of section 83(b) VATA 1994."
- At the initial hearing of the appeal it became apparent for the first time to the Tribunal that the Appellants were in fact making supplies to a retailer/marketer who was himself making onward supplies of the timeshare agreements. No witness statements had been supplied by the Appellant, and none had been directed prior to the hearing and the factual basis of the case at that stage was unclear. Counsel for the Appellant had however spoken to counsel for Customs and Excise on the day prior to the hearing and clarified the situation. At the Respondents' request the initial hearing was adjourned in order that the Appellants might supply them with a witness statement setting out the exact nature of the arrangements and produce supporting documents, and for the Commissioners to consider further the tax status of the supplies.
- At the resumed hearing the Commissioners retained their stance that the supplies were standard-rated, the basis being that the true nature of the supply made by the Appellants to the marketer was simply an agreement to procure club membership on appropriate terms to the marketer's client(s).
The evidence
- An agreed bundle of documents was produced at the original hearing and the Appellants also produced a brochure on the houseboats. At the resumed hearing the Appellants provided a further bundle of documents and a witness statement from Mr Jamie Hill, the managing director of the Appellant company. Mr Hill was the only witness.
The legislation
- Section 30 of the Value Added Tax Act 1994 provides:
(1) Where a taxable person supplies goods or services and the supply is zero-rated, then, whether or not VAT would be chargeable on the supply apart from this section –
(a) no VAT shall be charged on the supply; but
(b) it shall in all other respects be treated as a taxable supply;
and accordingly the rate at which VAT is treated as charged on the supply shall be nil.
The relevant notes to Group 1 of Schedule 9 which deals with exempt supplies provide:
(13) "Holiday accommodation" includes any accommodation in a building, hut (including a beach hut or chalet), caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use, but excludes any accommodation within paragraph (d).
(10) "Houseboat" includes a houseboat within the meaning of Group 9 of Schedule 8.
- Group 9 of Schedule 8 of the Act which deals with zero-rating relates to caravans and houseboats and provides:
Item No.1 …
- Houseboats being boats or on a floating deck structures designed or adapted for use solely as places of permanent habitation and not having means of, or capable of being readily adapted for, self propulsion.
- Supply of such services as are described in paragraph 1(1) or 5(3) of Schedule 4 in respect of a caravan comprised in Item 1 or a houseboat comprised in Item 2.
Note: This Group does not include –
(a) removable contents other than goods of a kind mentioned in Item 3 of Group; or
(b) the supply of accommodation in a caravan or houseboat.
- Schedule 4 of the Act provides:
1-(1) Any transfer of the whole property in goods is a supply of goods; but, subject to subparagraph (2) below, the transfer –
(a) of any undivided share of the property, or
(b) of the possession of goods,
is a supply of services.
The facts
- The Appellant company owns and operates a number of narrow boats which are let out as holiday accommodation for people to use on the canal network. It was not disputed that those supplies were taxable at the standard rate for value added tax purposes and the company had always accounted for tax on them at the standard rate.
- From the year 2000 onwards the Appellant had built some 19 houseboats. These boats are similar in appearance to the narrow boats, but they are wider, and are too wide to cruise on canals and in any event are not capable of self-propulsion, having no motors and not being licensed for cruising.
- The Appellant contacted the First National Trustee Company Ltd in order to set up a scheme for the selling of timeshares on the houseboats. Such a scheme was necessary in order to give the purchasers of the timeshares complete assurance that they would be able to enjoy the benefits of the timeshare for the duration of the scheme.
- A scheme was drawn up for the Appellant which was similar, if not identical to, other schemes for the sale of timeshares. The arrangement in principle was that the Appellant would offer to retailers time periods in respect of a specific boat or boats for onward sale to the public, the purchaser of the timeshare is then admitted to the scheme as a member which gives him certain specific rights which are referred to later on in this decision. In the scheme documents the Appellant is referred to as the "Founder Member". Upon the retailer finding a prospective purchaser of a particular timeshare week in a particular boat, the scheme provides that the Appellant transfers that boat to an owning company called Canaltime Houseboat Title Ltd, which is an independent nominee company. The scheme itself is to come to an end in 2076, the boats having a finite life span.
- Clause 5 of the scheme provides:
"5.1 The Founder Member shall cause to be conveyed or otherwise transferred to the Owning Company the legal title to the Boats set out in the Appendix hereto complete with all common rights and with such amenities, services, fixtures, fittings, equipment, furnishings, provisions and utensils as they shall reasonably consider appropriate.
- 2 The Founder Member shall arrange for the Shares to be granted to an independent custodian trustee (hereinafter called "the Trustee") or as the Trustee may direct who will hold the same upon trust for the benefit of the Members from time to time upon the terms of the Deed of Trust.
(In the definition section "the Shares" are defined as `all the issued shares in the Owning Companies'.")
"5.3(b) The Founder Member shall specify the weekly commencement and termination day in respect of each Boat upon procuring the transfer of the same to the Owning Company."
- The Trustee is the First National Trustee Company Ltd. By paragraph 6 of the scheme it was provided that prior to transferring the Owning Company to the Trustee `the Founder Member shall procure and thereafter the Trustee shall procure that the Owning Company engages in no trading activity whatsoever'.
- By Clause 6.1 it was provided that:
"The rights of occupation of the Boats shall be granted in accordance with the following provisions subject only to the Founder Member's absolute right to substitute a different Boat of comparable type to the Boat identified in the Member's membership application and/or Membership Certificate, or substitute alternative accommodation of a similar standard in the area in accordance with the provisions of clause 6.4 below."
- Clause 6.4 provides:
"In the event that for whatever reason no Boat is available for occupation at the Marina for a Member arriving at the commencement of any Weekly Period, the Founder Member shall provide alternative accommodation of a similar standard in the area, or any other form of compensation for the inability to provide a Boat at the Marina to that Member. Without prejudice to the generality of the foregoing, the compensation may be in the form of alternative boat or other accommodation, reasonable financial compensation, or other compensation as the Management Company at its sole discretion may decide."
- The Management Company is Canaltime Management Ltd, a company set up by the Appellant to manage and administer the timeshare club, Canaltime Houseboats, together with the Appellant.
- The scheme sets out the duties of the Appellant (the Founder Member), for rights of occupation, matters relating to the moorings, the membership of the club, the member's liability for payment of management expenses etc, other obligations of the members and matters relating to membership certificates and suspension or cancellation of membership, and various other provisions. Clause 8 provides:
"In consideration of the Founder Member causing the Shares to be vested in the Trustee or as the Trustee may direct, the Founder Member will initially be entitled to (and shall be liable in respect of) all the Membership Certificates in respect of each Boat listed in the initial Appendix, subject only to Clause 9.7 below."
Clause 9.7 provides:
"Notwithstanding any other provision of these Rules of Occupation, the Founder Member shall be liable to pay Management Fees in respect of all unsold Weekly Periods except insofar as they represent less than 20% of all Weekly Periods. To the extent that the Founder Member is so exempted, the costs and expenses relating to the exempted Weekly Periods shall be borne by all the Weekly Periods not exempted by the provisions of this clause 9.7."
- Clause 10 gives the Founder Member full power and an unfettered discretion to modify or add to the provisions of the Rules of Occupation which are set out in the scheme, provided only that such modification or addition does not materially prejudice the rights of the existing members.
- By clause 14 the Management Company is given power to suspend or cancel membership of any member who has committed a substantial breach of the obligations imposed on him by the scheme, and when a member's rights of occupation are cancelled permanently, they then revert to the Founder Member. The Founder Member is then obliged to pay to the club any outstanding debts of the former member.
- It is quite unclear from the documents and the evidence what the exact nature of the relationship between the Appellant and Canaltime Houseboats Ltd, the Owning Company, is. The effect of the scheme is that upon the retailer finding a purchaser for a specific period on a specific boat the ownership of the boat is transferred to the independent nominee company, Canaltime Houseboats Ltd, whose own shares are held on behalf of the members by the Trust Company. A Deed of Trust establishes the responsibilities of the Trust Company.
- When a member of the public buys a timeshare from the retailer he is admitted to membership under the scheme. He then becomes liable for the payment of management expenses. The requirement under Clause 9.7 that the Appellant pay the management fees in respect of unsold timeshare weeks prevents members having to pay a disproportionate part of the management expenses until most of the shares are sold.
- There are two main retailers (marketers) with whom the Appellant deals. Clearwater Sales Ltd and Southern Brokerage Holidays Ltd. The arrangement with Clearwater Sales Ltd is an oral one which is effectively in the same terms as a written agreement which exists between the Appellant and Southern Brokerage Holidays Ltd, a copy of which was produced to the Tribunal.
- Each timeshare gives a member the right to occupy a particular boat for a particular seven-night period. Allocation of particular weeks is in the hands of a reservation agent appointed by the management company. The retailers can sell the weeks allocated them to whomsoever they choose; the price at which such sales are made are governed by the agreement between the retailer and the Appellant (called "the Developer" in this agreement) which at Clause 6 states: "The actual prices payable by the clients, after the deduction of the administration fee and any VAT or similar tax arising, shall be not less than twice the Base Price shown in the Price List and Supporting Schedule, and not more than four times the Base Price shown in the Price List and Supporting Schedule except with the express permission of the Developer." It was Mr Hill's evidence that in fact the retailers set their own price which was usually but not always within those limits and they made a substantial mark-up. The liability on the retailer to pay only arose as and when he made a sale. Once the sale was made, a pre-agreed fee is paid to the Trustee who holds it on behalf of the Appellant.
- The agreement provides at Clause 1 as follows:
1(a) The Developer agrees to sell to the Marketer and the Marketer agrees to buy from the Developer timeshare weeks at Resort(s) for resale at the locations detailed … on a holiday ownership/timeshare basis …"
(c) Subject to the Marketer
(i) reselling only timeshare weeks outlined in the attached Price List …
(ii) complying with all other obligations incurred under this agreement.
The contract of Purchase by the Marketer of each timeshare week resold will be deemed to be entered into immediately prior to the contract of resale by the Marketer and completed on payment to the Trustee of the funds due to the Developer, Exchange Organisation, Trustee and Management Company under this Agreement.
The Marketer will, therefore, be deemed to be the owner of the timeshare weeks at the date of the signature of the contract of sale subject only to the absolute right of the Developer to repossess the timeshare weeks in the event of non-payment of the appropriate sums by the Marketer.
(d) The Developer engages the Trustee and the Trustee agrees to act as exclusive collection agent to the Developer for the collection of funds due to him resulting from the Agreement.
- …
- Subject to the Marketer complying with the terms of (2) above the Developer will, if so requested by the Marketer, on production of the purchase agreement signed by the Client procure the issue direct to the Client of the membership certificate/certificate of ownership relating to the relevant timeshare week/weeks. In the absence of such a request the Developer will procure the issue of the certificate in the name of the Marketer who shall then be responsible for all costs associated with the transfer of the certificate and the ownership of the timeshare week/weeks to the client."
- When the retailer makes a sale to a customer the Appellant through the Trustee company provides the customer with a Membership Certificate. Although that Certificate states inter alia that the Customer has paid the Appellant the appropriate purchase price, this is not in fact the case. The purchase price is paid to the retailer. The Certificate states as well that the customer is granted a right "to occupy and enjoy the Boat or type of boat at the Marina described in the Schedule subject to the Founder Member's absolute right to substitute a different Boat of the same or larger Boat type than described herein or alternative accommodation as set out in the Rules of Occupation …" Once a sale has been made by the retailer the specific timeshare week and boat sold are recorded by the Trustee and the evidence showed that it is only in the case of an emergency that the Appellant would actually use its power to substitute a different boat or different type of accommodation.
- It was Mr Hill's evidence that when the retailer receives money from the customer he pays over that money to the Trustee, rather than directly to the Appellant. It was accepted by him that despite the wording of the agreement, at no stage did the retailer himself receive any timeshare right, other than in circumstances where he was buying them on his own behalf. At the time of the sale to the customer the retailer has not himself paid for those rights.
The Appellant's case
- It was the Appellant's case that what was transferred to the retailer was possession of a particular boat or boats because it was only if he had possession that he could pass it on to the customer. It was submitted that by reference to Clause 1(b) of the agreement between the Appellant and Southern Brokerage Holidays Ltd which is set out above, it was clear that what was transferred was the transfer of possession. It was the Appellant's case that the only way the retailer could pass on any rights was if he himself had possession.
- The retailers could not be characterised as agents because they were not selling on a commission basis. Mr Barlow characterised the supplies made by the Appellant as being the sale to the retailers of the right to find third party occupiers for certain boats at particular times.
- It was further submitted that if there were a conflict between zero-rating and standard-rating, then by section 30 zero-rating takes precedence over both standard-rating and exemption in cases where there is an apparent duplication. In the present case however the exempting provisions did not apply. The sole issue was whether the supplies to the retailers were properly zero-rated. Notes 10 and 13 to Group 1 of Schedule 9 were not relevant because the supplies in the present case were not capable of falling within Item 1.
- The Appellant relied on Item 3 in Group 9 of Schedule 8. It was contended that under Item 1(1) the transfer of possession of goods is in contrast to the transfer of an undivided share and the two together are in contrast to the transfer of the whole property in goods (i.e. unfettered ownership). Transfer of unfettered ownership remained a supply of goods but the transfer of an undivided share or of possession was a supply of services. It was submitted that the scheme of the legislation was therefore that where actual ownership was or would be supplied, the supply remained a supply of goods, but where something less than outright ownership was transferred then that was a supply of services. Item 1(1)(b) must be given a wide interpretation to avoid transactions consisting of the transfer of possession of goods being neither a supply of goods nor a supply of services. On that basis supplies made by the Appellant which involved the transfer of possession of the boats must be held to fall within Item 1(1)(b).
- It was further submitted that in order to sell the rights to the members the retailers had to have possession of the boats as the member's rights involved, as an essential part of their rights, the right to occupy the boats which cannot be satisfied if the retailers themselves do not have possession of the boats.
- The supplies from the Appellant to the retailer were said not to be the supplies of accommodation in a houseboat under Note 3(b) to Group 9 to Schedule 8 because the retailer himself was not supplied with accommodation in the houseboat. The Appellant distinguished the case of G T Scaffolding Ltd (Decision No.18226) referred to by the Respondents on the basis that there was no factual analogy between the two cases, G T Scaffolding Ltd was concerned with inclusive possession which was not the issue in the present case.
- In respect of the contract between the Appellant and the retailer the phrase "timeshare week(s)" was to be given the meaning "possession of a boat". This was in accord with the definition of possession of goods in the case of Customs and Excise Commissioners v Oliver [1980] STC 73. In that case Griffiths J had at page 75g stated the following:
"By `possession' is meant in this context control over the goods in the sense of having the immediate facility for their use. This may or may not involve the physical removal of the goods."
In the present case the retailer had the immediate facility for the use of the houseboat.
- It was further submitted that it was not correct to characterise the supply by the Appellant as that of procuring for the client the membership certificate relating to the relevant timeshare week referred to in Clause 3 of the Agreement. The retailer was buying the right to possession of the boat for the necessary period in order for him to make onward sales. The notification to the Trustee of the client's interest did not characterise the supply.
- It was the Appellant's case that the transfer in question was the transfer of possession of goods within Schedule 4 paragraph 1(1)(b), and was therefore to be zero-rated under item 3 of Group 9 of Schedule 8. The exclusions to Group 9 of Schedule 8, in particular the exclusion of the supply of accommodation in a caravan or houseboat were not relevant in the present case. The Appellant was not supplying accommodation to the retailer.
- The transfer of possession of goods in Schedule 4 appears in contrast to the transfer of an undivided share and the two together appear in contrast to the transfer of the whole property in goods (i.e. unfettered ownership). Transfer of unfettered ownership remained a supply of goods but the transfer of an undivided share or of possession was simply a supply of services. The scheme of the legislation was that where actual ownership was or would be supplied the supply remained a supply of goods but where something less than outright ownership was transferred that was a supply of services. Item 1(1)(b) was to be given a wide interpretation to avoid transactions consisting of the transfer of possession of goods being neither a supply of goods nor a supply of services. On that basis the supplies made by the Appellant which involved the transfer of possession of the boats must be held to fall within Item 1(1)(b).
The Respondent's case
- It was accepted by the Respondents that the Tribunal should look at the true nature of the supply and not the contractual basis. It was submitted that it was odd in the circumstances of the case to say the Appellant transferred possession of the boats when it was questionable whether the Appellant had the requisite possession at the time it made the supplies, given the onward sale of the boats to Canaltime Houseboats Title Ltd at the time the supply to the retailers took place.
- Insofar as the Appellant was submitting that paragraph 1 of Schedule 4 of the VAT Act 1994 was an exhaustive code that provided for all supplies relating to tangible goods and that any such supply that is not a supply of goods must either be a supply of an undivided share of property or a supply of a possession of goods was misconceived. Section 5(2)(b) of the Act gave the exhaustive definition of "supply of services". Some transactions relating to tangible goods (a) do not amount to a transfer of the whole property in goods and therefore are supplies of services; but (b) are neither a transfer of an undivided share of property nor the transfer of possession of goods. It was not open to the Appellant to prove his case by exclusion, the Appellant had to establish that the supplies made properly fell within Schedule 4 paragraph 1(1)(b) and Item 3 of Group 9 Schedule 8. (This point was subsequently conceded by Mr Barlow.)
- Even if the Appellant succeeded in showing that he was supplying possession to the retailer, because that was what he supplied to the customer, it was clear that what the customer received was timeshare accommodation in the houseboat and so was caught by the exception at Item 3 Note (b) to Group 9 of Schedule 8.
- The Appellant's argument that Item 1 of Schedule 4 was intended to relate to all supplies was fallacious. In the case of GT Scaffolding Ltd the Tribunal had found the supply was not of the possession of goods in the situation where the customer did not have control over the goods. The Tribunal in part defined "transfer of the possession" as "the transfer of the control over the goods or, approached from a different standpoint, the transfer of exclusive possession." In the Respondents' view there was a similarity between the facts in the GT Scaffolding case and the present one because what the customer bought in the present case was the whole scheme, which specifically limited his rights.
- In the present case the Appellant did not even own the Owning Company, its shares being held on trust for all the members. The effective control over any one boat exercised by the Appellant was limited by (a) the responsibility for the management and administration of the club (and, thereby, the boats) which was delegated to the management company and (b) the rules of occupation which pursuant to Clause 6(2) determined that the reservation agent (appointed by the management company)
(i) issued booking conditions that were binding on all members (presumably including the Founder Member who was the Appellant); and
(ii) allocated the boats.
In the circumstances it was far from clear whether the Appellant himself could be said to have "possession" of any particular boat at the time it made supplies to the retailer.
- The supply which was in fact made was an agreement to procure club membership on appropriate terms to the retailer's client. It was not clear if it was the Appellant or the Trustee who in fact granted club membership.
- The system could be characterised by the Appellant initially making a gratuitous allocation of weeks to the retailer, effectively on sale or return, the retailer then sold a timeshare period to the client and, following the retailer complying with certain conditions (principally making payment to the Trustee), the Trustee issued a membership certificate to the client relating to the relevant timeshare period.
- This characterisation is supported by the contract between the retailer and the client. The retailer did not contract to transfer a block of timeshare rights that it itself was at that stage in possession of. The retailer's contract stated simply that it agreed: "To procure … that the Founder Member shall procure that the Purchaser is registered with the Trustee as a Holiday Owner."
- Clause 1 of the Developer's Agreement suggested that the retailer obtained timeshare rights himself. There was nothing in the contract to indicate how these rights should be transferred. The contract in fact provided for the system as set out above.
- The simple granting of membership to the retailer's client could not amount to transfer of possession of a houseboat. The highest that could be said was that the Appellant made a supply to the retailer of "timeshare weeks" but this could not possibly amount to the transfer of the possession of a houseboat because the Appellant had the right to substitute a different boat or alternative accommodation which undermined the notion, furthermore the customers had a very limited degree of control over the boat in that they were not able to move it, they did not insure it, they had no maintenance obligations and the strict rules of the scheme pointed to a complete lack of control.
- The bundle of timeshare rights ultimately acquired by the customer did not amount to the transfer of the possession of a houseboat because their interest lacked the element of "immediacy" required by Griffiths J's test in the case of Oliver, nor did they have the requisite degree of "control", similar to the clients in the GT Scaffolding case.
- Alternatively, if what was supplied was possession as contended for by the Appellant, then it was possession of timeshare accommodation in a houseboat which was caught by Item 3 Note (b) of Group 9 to Schedule 8.
Decision
- This case is characterised by conflicting clauses in the documentation and a conflict between Mr Hill's evidence and what appears to be the case according to the documents. However, Mr Hill was not challenged in his evidence, and I accept that where his description of events differs from what would have been expected from the documentation, it is his evidence which reflects the reality of the situation. The supply is to be characterised by the actual circumstances, and not by the documents.
- It was part of the Appellant's case that whilst the Appellant had at the time of the first sale in respect of each boat of a timeshare week transferred ownership of the boat to the Owning Company, nonetheless the Appellant at all times retained possession of the boat which indeed appears to be the case from the scheme of documents given the various obligations on the Appellant as Founder Member. Numerous clauses in the scheme relate to actions to be carried out by the Appellant and responsibilities and liabilities imposed on it after the initial sale. Since the Appellant retains possession, the supply to the retailer cannot properly be characterised as a supply of possession.
- If the Appellant were correct in his argument, then by the same reasoning it would be the case that since (which is not disputed) the retailer sells to the client a timeshare in the particular boat, then what the retailer himself must have acquired from the Appellant is a timeshare or a right to a timeshare, as indeed it states in the agreement that he does. The supplies of the upkeep of the boat are made by the management company under the terms of the scheme. These supplies are purchased by the client when he signs up to the timeshare agreement. What the retailer is selling to his client is the right to participate in the scheme under a timeshare agreement. It is this right to participate in the scheme which is supplied by the Appellant to the retailer who may either himself subscribe to the scheme or sell it on to his customers.
- It is not necessary for the retailer to be in possession in order to make an onward supply of the timeshare to his client any more than an estate agent needs to be in possession of a property in order to sell it on behalf of his principal. It was submitted by Mr Barlow that the retailers here could not be characterised as agents because they could themselves determine the price at which they sold the timeshare. This was not a point on which I was addressed by Mr O'Connor, but it is clear from paragraph 6 of the agreement between the Appellant and the retailer that the Appellant does exercise some control over the price at which the timeshares are sold. However it is not necessary in order to decide this case to decide whether or not the retailers are agents of the Appellant or not and I do not do so.
- It was argued by Mr Barlow that the Appellant was not selling to the retailer the supply of accommodation in a boat as in Note (b) to Group 9 of Schedule 8, because the retailer would have to be given accommodation in the boat in order to sell it on, but this argument applied equally to possession, there is nothing to distinguish the two.
- With regard to clause 1(c) of the agreement between the Appellant and Southern Brokerage Holidays Ltd, the fact that it was thought necessary for the agreement to deem that the contract of purchase by the retailer of each timeshare week be entered into immediately prior to the contract of resale by the retailer and completed on payment to the Trustee of the funds due to the Appellant, indicates that the true position is otherwise. It is only necessary to deem it to be the case since it is not in fact the case other than by virtue of the deeming clause. I do not accept the Appellant's argument that what was supplied to the retailer was in fact possession of any particular boat. I accept Mr O'Connor's argument that the supply which was in fact made was an agreement to procure club membership on appropriate terms to the retailer's client. I accept his characterisation of the supply as set out above.
- The Appellant's argument does not deal with the fact that the documents show that the scheme allows the Appellant to substitute a boat or even alternative accommodation in certain circumstances, and this itself demonstrates the limited degree of control the retailer's clients have over the boat. It is only in the most limited sense of the word "possession" that the owners of the timeshare rights could be said to be in possession of the houseboats, and such limited possession as they have relates to the particular week or weeks which they purchase, it does not arise at the time of the purchase. It is also relevant that they do not insure the boat, they have no maintenance obligations and they are bound by the strict rules of the scheme. They do not meet the test of "immediacy" propounded by Griffiths J in the case of Oliver.
- If I am wrong in the above analysis, then I accept Mr O'Connor's further argument that if what was supplied was possession, then it was possession of timeshare accommodation in a houseboat which is caught by item 3 Note (b) of Group 9 to Schedule 8 and is therefore a standard-rated supply.
- This appeal is dismissed.
- With regard to costs, the Respondents applied for the costs which were reserved following the first day of the hearing when the case could not proceed. I direct that the Appellant shall pay the Respondents' costs in respect of and limited to the hearing of 30 October 2003.
MISS J C GORT
CHAIRMAN
RELEASED:
LON/02/0032
