ZERO-RATING – Race programme – Nature of supply – Racegoers admitted to greyhound race meeting on payment of £5 – Programme provided at turnstile for no additional price – Whether supply of programme zero-rated – No - Whether single supply of access to race meeting – Yes - Or two separate supplies one of access to meeting and the other of the programme – No – Whether Talacre Beach decision applies to separate the supplies – No - Appeal dismissed 
 
LONDON TRIBUNAL CENTRE

	TOWN AND COUNTY FACTORS LTD	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 STEPHEN OLIVER QC  (Chairman)
						 KENNETH GODDARD MBE					 

Sitting in public in London on 11 March 2004

Justine Dale, Ernst & Young, accountants, for the Appellant 

Owain Thomas, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	This appeal concerns supplies made by Town and County Factors Ltd  (“TCF”) to members of the public who pay the published admission price of £5 for meetings at greyhound racing stadiums and obtain admission and a programme.  Is there a single standard rated supply of admission, as the Commissioners contend?  Or are there two supplies, one for admission for a consideration of £3.50 and the other a zero-rated supply of the programme for £1.50, as TCF contends?

2.	The decision appealed against was issued in a letter dated 13 March 2002 issued to TCF, the representative member of the Hilton Group Companies.

3.	The oral evidence upon which we have based our findings of fact was provided by -

(i)	Gordon Bissett, operations controller of the two greyhound racing tracks which are owned and run by Ladbroke Racecourse Management, i.e. a stadium at Crayford, South London, and a stadium at Monmore Green, Wolverhampton.

(ii)	G N Rigby and Fiona Curran, officers of Customs and Excise, who visited the Crayford stadium on 16 February 2004.

The documentary evidence included a programme for racing in the evening of 19 January 2004.  

Facts

4.	The supplies to which this appeal relates are provided at the Crayford Stadium at five live greyhound meetings each week and at the Monmore Green Stadium on (usually) four greyhound meetings each week.  We refer to these as “the Meetings”. The Meetings are open to racegoers of all ages. The public are admitted to Meetings through turnstiles.  A notice displayed at the turnstile reads as follows:

“WELCOME TO CRAYFORD GREYHOUND TRACK
	SATURDAY/MONDAY EVENINGS

	Adult £5  Child £3.50		BAGS MEETINGS  FREE ADMISSION”
	Race cards £1.50”

There is then a separate notice which reads “ADMISSION £5.00”.

5.	At the time of the disputed decision (March 2002), the amounts charged were £3.50 at Monmore Green and £4.00 at Crayford.  

6.	This appeal is concerned with TCF’s supplies to individuals to whom we refer  as “the £5.00 racegoers”.  These are racegoers who, in response to the notice “Admission £5.00”, pay £5.00 and are admitted through the turnstile and are given a programme.  There are other classes of racegoers who are admitted to the ground but are not provided free of charge with a programme.  These are:

(a)	Racegoers under 18 years.  These are charged £3.50 for admission.  They are not allowed to bet.  They are not provided with a programme at the turnstile.  

(b)	Old age pensioners.  OAP racegoers attending the Monmore Green stadium are charged nothing for entry.  But OAP racegoers attending the Crayford stadium are charged nothing for entry and are given a programme free of charge.

(c)	Guests of owners may be admitted free of charge.  (Owners of greyhounds are not charged any admission fee at all and at Crayford they get a free programme as well.)

(d)	Late arrivals.  Members of the public arriving after 9.15pm are admitted free and do not get a free programme.  

(e)	TCF offers dining packages at which, in return for a lump sum of £27, the racegoer obtains a package of admission, a meal and a programme.  The supply of the programme on these occasions is accepted as part of a standard rated single supply.

7.	As well as the stocks of programmes kept at the turnstile for distribution to the £5.00 racegoers, programmes are kept there for sale for £1.50 each to anyone who wishes to buy one.  At Monmore Green programmes are also available for sale at the bar.

8.	Entrance is free to all racegoers who attend BAGS meetings.  These meetings are run by The Bookmakers Afternoon Greyhound Services under contract with TCF.  Programmes at BAGS meetings are on sale to racegoers.    

9.	In the course of a survey performed at the two stadiums in April 2002 racegoers were asked what the price paid at the turnstile was paid for.  81 per cent of those responding said that they thought it was not only for the right of admission but also for a Programme.

The Meetings

10.	12/13 races are held at Meetings on Saturday evenings.  Morning and afternoon Meetings usually have eight races.  Access to the Meeting enables the racegoer, unless under 18 years, to bet on races with the Totalizator and with independent bookmakers who set up stalls on the edge of the racetrack.  Access to the Meeting also allows access to the stadium, to watch the races and to make use of the facilities consisting of  restaurant,  licensed bar, snack bar and public toilets.

The Programme

11.	The front sheet of the programme includes the words “Official Programme - £1.50”.

12.	The “race card” is the part of the programme that includes the details for each race of the Greyhounds running, their trap numbers, the names of their owners and trainers and their performances in the eight most recent races or trials.  The last detail is referred to as “the Form”.  The programme gives a page of instructions as to how to read the race card and what bets may be placed with the Tote; it advertizes greyhounds for sale and BAGS races and it contains a page of advice to racegoers on how to keep their gambling under control.

13.	The Form consist of eight lines. It is compiled by staff in the racing office of the stadium.  Each line contains 15 pieces of information.  These include -

•	The date of the race or trial to which it refers
•	The distance of the event 
•	The number of the trap occupied by the runner
•	The time taken by the greyhound to reach the finish line
•	The relative position, in relation to other greyhounds, of the particular greyhound on four specific points around the track
•	The position in which the greyhound finished 
•	The number of lengths by which the greyhound finished behind the winner or, if it won, the lengths by which it won the race
•	The name of the greyhound that won that particular race
•	Comments made by the racing manager of how that particular greyhound’s performance could best be described
•	The time taken by the winner to win the race
•	The going allowance.  (This refers to the state of the ground as determined by the racing manager.)
•	The weight of the greyhound at the time of the race
•	The starting price of the greyhound
•	The grade of the race and the “calculated time” achieved in the race; this is determined by reference to the actual time adjusted by, among other things, the going allowance.

14.	The information from which the Form is drawn has a substantial value.  The Greyhound Racing Board’s Funding Plan, produced in February 2001, put a value of £30 million on the rights to the aggregate of that information.

15.	Proof pages of the programme are produced two days before the race day but are not released until the Meeting.  

16.	Other information contained in the programme includes results of stewards’ enquiries, details of name changes of greyhounds and names of the course officials.

17.	Gordon Bissett said in evidence (and we accept this) that the programme may serve as a souvenir in the hands of some racegoers. 

18.	It is not necessary to have a programme to place a bet.  The Internet is a possible source of information about the greyhounds that are running at the Meeting.  We accept Mr Gordon Bissett’s evidence that this requires access to numerous websites to obtain information of the scale provided in the programme.  The Racing Post is another source but this provides limited information.  Our conclusions in this connection are that the typical racegoer attends the Meeting intending to place bets and wants the information to decide what bets to place; the programme provides this information in a uniquely accessible, authoritative and comprehensible form.

The contractual position

19.	We need to determine as a preliminary question what as a matter of contract is provided to the £5 racegoer in return for his or her payment at the turnstile of £5.

20.	TCF argue that each £5 racegoer is provided with admission for £3.50 and a programme for £1.50. This, say TCF, is evidenced by two circumstances.  The first circumstance was explained by Gordon Bissett. Any racegoer who might otherwise have to pay £5 in response to the notice “Admission £5” may demand entry for £3.50 and will be admitted for that amount but will not get a programme.  Gordon Bissett explained the scenario.  The racegoer comes to the turnstile and says – “I do not want a programme”.  The operator at the turnstile responds that the price is inclusive of a programme. In circumstances where the racegoer insists, the turnstile operator restates that the admission price of £5 includes the programme but explains to the customer that the programme contains all the details they need for full participation in the evening’s gaming and entertainment.  He produced an e-mail dated 2 March 2004 that reminded the turnstile operators how to deal with this situation. However, if by that time the customer is still insistent on entry without a programme, then the turnstile operator will give way and the racegoer will be admitted on payment of £5 but will get no programme.  Mr Bissett also referred to the circumstances of 16 February 2004 to which we will return.  At this stage we will focus on the position at the time when the decision under appeal was issued.

21.	We read the notice “ADMISSION £5.00” as an offer of admission to the Meeting on payment of £5.  Admission carries with it the right to a programme and to access to all the facilities provided within the stadium.  The racegoer who presents £5 at the turnstile accepts that offer and the contract is made.  The racegoer who might otherwise have to pay £5, but stands his ground and, notwithstanding the attempts of the turnstile operator to persuade him of the benefit of a programme, insists on being admitted for £3.50, makes a counter offer to pay £3.50 in return for admission.  The turnstile operator has authority to accept this offer and does so. This is how the matter was seen by TCF accountants when they wrote to the Commissioners on 18 October 2001 explaining the position.  We heard no evidence as to how many racegoers, who would otherwise have to pay £5, have in fact been admitted at £3.50 and without getting a programme.  We infer that it is an exceptional occurrence.  The great majority (the £5 racegoers) pay the £5 and are handed a programme and admitted to the stadium.  Certainly, according to Mr Bissett, that is how TCF want things to happen.  There is a good profit to TCF because the programme cost only 50p to produce; and to have racegoers seeking entry for £3.50 would seriously hold up access at the turnstile.

22.	There are, we accept, other exceptional occasions when racegoers who would otherwise pay £5 for admission are let in for £3.50.  It so happened that on 16 February 2004 a very popular Meeting took place at Crayford.  TCF ran out of programmes and, according to a contemporaneous note produced by the turnstile operator, 26 racegoers were “let in at £3.50 due to no programme”.  Gordon Bissett said that his enquiries had shown that during the period before the printing of additional programmes, the racegoers had been given the choice of being admitted for £3.50 without a programme or being admitted for £5 even leaving their names with the turnstile operator so that they could come back and claim their programmes.  There was no evidence of any list of names.  Indeed the two Customs and Excise officers (G N Rigby and Fiona Curran) who happened to have been observing the premises on that occasion saw no writing down of names; the racegoers paid the £5 and, as they saw it, moved on quickly to the race track.  We are satisfied that on that occasion, and no doubt when other such emergencies occur, racegoers will be admitted for a payment of £3.50 without having to go through the rigmarole of counter offer, counter persuasion and acceptance referred to above.

23.	Referring to the question in paragraph 19, we conclude that the £5 racegoer obtains, in return for payment of £5, admission to the stadium and access to all the facilities of the Meeting including a programme. This does not, we recognized, conclude the question of whether TCF makes a zero-rated supply of the programme to the £5 racegoer; but we approach that question with this conclusion in mind.

Conclusions

24.	The question for us is whether the £5 racegoer receives a zero-rated supply of a programme in return for £1.50 of the £5 paid at the turnstile.  It is not in issue that TCF’s separate sales of programmes are zero-rated supplies.

25.	We approach the question following the steps laid down by the European Court of Justice in Card Protection Plan Ltd v Customs and Excise Commissioners [1999] STC 270 at page 293.  

26.	This is a case “where the transaction in question comprises a bundle of features or acts” (see paragraph 28 of the judgment).  We must therefore look at “all the circumstances in which the transaction took place”.  Here the transaction between TCF and the £5 racegoer comprises a bundle of features including admission to the stadium, the staging of a number of races, access to betting facilities and the provision of the Programme.  Our summary of the facts in paragraphs 4 to 20 is designed to cover this stage of the process.

27.	Paragraph 29 of the Court’s judgment requires us to recognize that every supply of service (which we take to include goods as well) must usually be regarded as distinct and independent.  Without more this would enable us to regard the supply of the programme as a separate supply from the other features in the bundle.  The Court goes on to direct this but not to “artificially split” a supply which, from an economic point of view, comprises a single supply.  Here TCF’s supply provides each £5 racegoer with the same package of benefits in return for £5; they are all available to the racegoer whether he or she uses them or not.  From the economic point of view they have at least the semblance of a single supply.

28.	The operative part of the Court’s judgment lies in the following sentence in paragraph 29:

“… the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical customer with several distinctive principal services or with a single service.”

Lord Slynn’s comment when the Card Protection Plan case was finally decided in the House of Lords [2001] STC 174 at 183 (paragraph 22) was as follows:

“It is clear from the Court of Justice’s judgment that the national court’s task is to have regard to the ‘essential features of the transaction’ to see whether it is ‘several distinct principal services’ or a single service and that what from an economic point of view is in reality a single service should not be ‘artificially split’.  It seems that an overall view should be taken and over-zealous dissecting and analysis of the particular clauses should be avoided.”

29.	Our understanding of the essential features of the transaction between TCF and the £5 racegoer is that in return for a single payment of £5 in response to the notice “Admission £5.00” TCF supplies the racegoer with a single package of facilities enabling the racegoer to attend and “fully participate” in a greyhound race meeting.  It is an all or nothing supply.  That there may have been individual racegoers who would otherwise have been admitted for £5 but struck a different deal at the turnstile and were admitted on payment of £3.50 is beside the point.  That was a different sort of supply from the one that is in issue here; moreover the racegoer admitted on these terms will not have been “a typical customer”.  

30.	With those essential features of the transaction in mind we move on to the next stage of the enquiry.  Directions for this are found in the following two sentences in paragraph 30 of the judgment of the ECJ:

“There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, while one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service.”

“A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied …”

31.	Admission to the Meeting and all the facilities provided by TCF are the elements constituting the principal service.  The £5 racegoer also receives as of right a programme.  Does the obtaining of a programme constitute for the £5 racegoer “an aim in itself”? We are satisfied that the programme contains information of immediate and practical value to the racegoer and that that information has been compiled from a “database” of great value.  We recognize that some racegoers, whether £5 racegoers or not, might wish to keep their programmes as souvenirs.  At the same time there will be racegoers who either do not or cannot use their programme.  We also recognize that the survey referred to in paragraph 9 above shows that 81% of all racegoers believed that the price they paid at the turnstile was not only for the right of admission but also for a programme.  But that is not in dispute here.  It is because there are several features to the transaction under which the £5 racegoer pays the £5 that the present enquiry has to take place.  

32.	We accept that the programme is indispensable to the typical racegoer; by the same token entry to the stadium and its betting facilities are essential prerequisites to that racegoer being able to place on-course bets. Taking all these features into account we are not persuaded that the supply of the programme constitutes for the £5 racegoer “an aim in itself”.  The programme, well presented and comprehensive as it is, ranks as a “means of better enjoying the principal service supplied”, i.e. admission to the Meeting and all the facilities provided by TCF.  This conclusion is reinforced by the evidence of Gordon Bissett who, as noted in paragraph 20 above, said of the programme that it contains all the details they need for full participation in the evening’s gaming and entertainment.

33.	Returning to the ECJ’s decision in Card Protection Plan, the Court says in paragraph 31 that “the fact that a single price is charged is not determinative” and “if the circumstances … indicated that the customers intended to purchase two distinct services … it would be necessary to identify the part of the single price which related to” each service.  It was emphasized for TCF that a high proportion of the aggregate consideration provided by the £5 racegoer related to the programme which was priced at £1.50; because the proportion of the £5 attributable to the programme was so high it followed, it was argued on the strength of Customs and Excise Commissioners v Madgett & Baldwin [198] STC 1189 at 1206, paragraph 24 and Sea Containers Services Ltd v Commissioners of Customs and Excise VAT Dec 16004, that there was a separate supply of the programme.  We do not find this persuasive.  Both the cost of the programme (£0.50) and its selling prices (£1.50) are substantial amounts when compared to the £5.00 admission price.  Nonetheless we can find no “benchmark” test laid down in either Madgett & Baldwin or Card Protection Plan that, where an element in the package has a substantial effect on the package price, then there are at least two separate supplies.  What paragraph 31 of the Card Protection Plan decision is directed at is the apportionment question that arises once it has been determined that, for a single price, a person has received two separate supplies.

34.	For all those reasons we have concluded, on the main argument, that the supplies made by TCF to the £5 racegoers are to be treated for VAT purposes as single standard rated supplies of admission to the Meeting.

The Talacre Beach Caravan Sales issue

35.	The alternative argument advanced for TCF is this.  The supply of the programme cannot be treated for VAT purposes as part of a single standard-rated supply of admission; this is because the programme is expressly given zero-rated status by VAT Act 1994 Schedule 8 Group 3.  Schedule 9, Group 1 item 1(l) (which specifically excludes from exemption the grant of a right to occupy “a box, seat or other accommodation at a sports ground”) makes TCF’s grant of admission to a Meeting standard rated.  There is, so the argument for TCF goes, no means by which item 1(l) could be construed to include the programme.

36.	We, in common with the Commissioners, cannot accept that argument.  Item 1(l) of Group 1 has nothing to do with supplies of programmes.  Its sole function is to exclude from the exemption, that might otherwise have been given to the grant of a right of admission to a sports stadium, the grant of the right of occupation of boxes, seats and other accommodation. The wording of item 1(l) does not however touch on the question of what is the essential nature of the present supply, namely of admission to a race meeting held at the stadium.  It has no bearing on the question of whether the single standard rated supply of admission to the race meeting includes a programme, or whether the programme is supplied separately.  By complete contrast Note (a) to Schedule 8 Group 9 specifically directs that supplies of removable contents, sold with caravans, are not to be zero-rated as supplies of caravans.  It states that – “This Group does not include removable contents … .”

37.	Note (a) to Group 9, as construed in Talacre Beach Caravan Sales Ltd v Customs and Excise Commissioners [2004] EWHC 165 (CL), operated as a specific exclusion from a general rule in the absence of which exclusion the supply of the removable contents might have been treated for VAT purposes as ancillary to, and sharing the tax treatment of, the main supply of the caravan.  Nothing in the VAT code operates as a specific exclusion from the application to the present circumstances of the general rule explained in, e.g, Card Protection Plan. There is nothing comparable to Note (a) to Group 9.  In particular there is nothing which says that, because a supply of a programme on its own is a zero-rated supply, that supply remains a zero-rated supply notwithstanding that it is ancillary to a standard rated principal supply such as the present supply of admission to a race meeting.

38.	For those reasons we reject the Talacre Beach argument.

39.	We dismiss the appeal.

STEPHEN OLIVER QC
CHAIRMAN

RELEASED:

LON/02/322