VATA 1994 Schedule 5 Group 3:  B.E.C.T.U. Agreement; whether taxpayer’s services within definition of Film Producer; whether associated production requirements taxable; appeal partially successful.  Expenses awarded only to extent of professional advice obtained.

EDINBURGH TRIBUNAL CENTRE

	IAIN HOPKINS	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman)   Mrs G Pritchard, BL., MBA., WS
					 (Member)      Mrs Charlotte Barbour, CA., ATII

Sitting in Edinburgh on Thursday 4 March 2004

for the Appellant		Mr Iain Hopkins

for the Respondents	Mr Andrew Scott. Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2004.

DECISION

This appeal consists of two consolidated appeals namely of (1) an appeal by a Limited Company called Woodside Lodge Production Services Ltd (now in liquidation) against an assessment of approximately £4,553 issued prior to the time of liquidation and (2) an appeal by Iain Hopkins against a decision of the Commissioners dated 08/11/01.  They were consolidated by a Direction of this Tribunal on 10 July 2002.  The first appeal was struck out on 25 September 2003.

On the second appeal against the decision of the Commissioners dated 8/11/01, the Appellant represented himself and gave evidence.  The Commissioners were represented by Mr Andrew Scott of Shepherd & Wedderburn.  Evidence was heard from two officers of the Commissioners Mr Thomas Bell and Mrs Irene Parkes.  Written evidence consisted of an extract from the Customs and Excise Manual Volume V1 Value Added Tax – part 4 Place of Supply produced by the Appellant and a bundle of documents lodged by the Commissioners which were tabbed 1-13.  A list of Authorities was also produced tabbed 1-10.  Where reference is made to the Appellant’s written evidence it will be referred to as the B.E.C.T.U. Agreement.  Where reference is made to the written evidence its contents will be treated as repeated here.  Where reference is to Commissioners written evidence the term Tab E (No) will be used and for Authorities Tab A (No) will be used.

The main thrust of the Commissioners’ Statement of Case in this appeal until recently was that Mr Iain Hopkin’s business formed a tour operators business and his Value Added Tax was therefore due to be levied under the Tour Operators Margin Scheme.  The appeal itself is against a decision by the Commissioners that the Appellant was not entitled to treat certain services he provided on one occasion as entitled to be excluded from the scope of Value Added Tax.  The letter which contained the decision appealed was addressed to the Appellant’s representative and is at Tab 8.  For the sake of clarity it is repeated here 

	“Dear Mr Fergusson

	Mr Iain Hopkins

	Vat Reg No 680 5043 47

	I refer to your letter dated 2 November 2001 regarding your above named client.

	As explained to you in my previous letter as your client supplies some elements of the Tour Operators Margin Scheme as a total package, the whole of his supply would be covered by that scheme.  This included the supply of person’s services.  If the customer is a business your client can treat this as a wholesale supply and issue invoices (as he has been doing).  However as the supply takes place in the UK (regardless of where the customer belongs) this is taxable at the standard rate.

	I do not consider that the supplies made by your client are covered by Schedule 5 of the Vat Act 1994.  If you disagree with this decision your client has the right to appeal to an independent Vat & Duties Tribunal within 21 days of the date of this letter”.

The Trib 1 appeal form addressed to the Tribunal states that the appeal is against the decision to treat the supplies or services which are the subject of this appeal as coming within the Tour Operators Margin Scheme (TOMS) under Section 53 of the Value Added Tax Act 1994 (VATA 1994) and SI 1987/1806.  The appeal is successful to the extent that the submission that TOMS applied was withdrawn by the Commissioners.  However at the Tribunal the Commissioners pursued the assertion contained in the letter that the Appellant was not covered by Schedule 5 of the Value Added Tax Act 1994.  The Appellant proceeded on that basis.

He charged and accounted for VAT properly by a charge in the provision to UK clients or non-VAT registered EC clients.  Where an EC client has a VAT registration number of its own he is not obliged to charge or account for UK Value Added Tax under Community Legislation namely Article 9 (2(e)) of the Sixth Directive.  

The term “outside the scope of VAT”, “exempt” and “zero rating” were used indiscriminately to refer to the non-application of VAT to an invoice.  Since the Appellant’s invoices to UK customers required to be standard rated, and his invoices to EC customers required to be standard rated where his customer was not VAT registered in the country, his invoices to EC customers required to be zero-rated where they were VAT registered since VAT would then be applied in the country of supply, and since hotel accommodation is an exception from exemption from VAT relating to land, the Tribunal has attempted to use the correct terminology where appropriate.  

Background
The Appellant, who had taken advice from several sources including the VAT National Helpline and a VAT specialist adviser was concerned about the Commissioners’ proposed treatment on only one invoice at Tab E3 pp5-10 which he understood was outside of the scope of VAT in its entirety as the supplies charged for in the invoice should be treated as supplies made by him as a consultant film producer to a company registered in the United States of America, to produce still photographs for advertising material to be published exclusively in the United States of America and as such the place of supply was in the recipients country.  No assessment for VAT has ever been issued by the Commissioners in respect of the said invoice.  Any assessment would now be time barred.  At the pre-trial review it had been suggested that the parties might agree facts before this Tribunal hearing.  In the event there appeared to be little agreeable communication between the parties.  No agreed facts were submitted.  In addition it is noted with some regret that the Appellant did not receive his bundle of documents from the Commissioners before the Hearing began.  He had been advised of their despatch only one day before the Hearing and had even called at the appropriate Royal Mail sorting office in an attempt to locate them so that he might have some indication of the content.  Although the bundle mainly consists of letters between the parties there are also printouts of e-mails and web pages which caused the Appellant difficulty.  There was also a list of authorities.  This will be commented on later.  

Preliminary Matter
Mr Scott for the Commissioners opened the Hearing with an opening submission to the effect that the Commissioners were not now relying on their arguments in the Statement of Case so far as they related to TOMS.  Their argument would be that the Appellant’s supplies should all be standard rated and could not come within Schedule 5 paragraph 3.  

The Law used in this Decision
1.	Section 7 and Schedule 5 VATA 1994 Tab A1.  
2.	Value Added Tax (place of supply of services) Order 1992 SI 1992/3121 Tab A2.
3.	Article 9 of EC Sixth Council Directive (77388/EEC) Tab A3.
4.	Section 30 VATA 1994 – zero rating.
5.	Section 31 VATA 1994 - exempt supplies and acquisitions – supplies of land.
6.	Schedule 9 VATA 1994 – exclusions from exemption – hotel accommodation.

Other References
1.	Commissioners VAT Notice 741.  Place of Supply of Services (Sept 1998) paragraphs 4.5 & 11.1-12.5
2.	Customs and Excise Manual, Volume V1 Value Added Tax Part 4 Place of Supply, Appendix J Services provided within the entertainment industry (guidance agreed with B.E.C.T.U. 1 March 1997) which includes a description of a Consultant in the entertainment industry and gives a description of certain roles which would be treated as supplies made where received and certain roles which would not.

Evidence and Findings in Fact
1.	Iain Hopkins registered for the purposes of Value Added Tax as an individual on 31/03/99 under Registration Number 74262060.  This is not the Value Added Tax Registration Number quoted by Mrs Parkes on the disputed letter of 8/11/2001, Tab 8.  She used the Registration Number of the said company now in liquidation.  The letter of 08/11/2001 is found to be the disputed letter relating to this taxpayer.  The Appellant’s main business activity was given as “Production Service Company for the television, film and photographic industry” in his VAT application Tab E1.  His trading name is 1759 Production Services.  
2.	On 01/06/01 he was visited by Mr Thomas Bell who after the visit decided that one invoice Tab E3 pp5-10 had possibly not been correctly processed.  He also queried certain invoices to customers in the European Union (EU).  
3.	This invoice Tab E3 pp5-10 relates to work done for The Production Company of Boston based in the United States of America (the American customer).  The still photographs produced for the American customer were for advertising Scotch Whisky made by an American company.  The photographs were for use and distribution in American publications only.  The advertisements would not and did not appear anywhere else, and in particular not in the UK or EU.  The Appellant was not entitled to retain photographic material, or any rights of any description in the produced photographic work.
4.	Mr Bell issued no assessment following a robust objection by the Appellant’s representative that the Appellant had correctly dealt with this invoice which was in the correspondence Tab E3 referred to as a sample.  Mr Bell reconsidered the matter denying that the services rendered by the Appellant could be those of a film director or producer and suggesting that since the Appellant appeared to provide hotel accommodation his services might fall within TOMS (Tab E4).  
5.	We find further on 26/10/2001 the Appellant’s representative suggested to the Commissioners that if there was disagreement amongst the parties that inevitably the Commissioners would raise an assessment.  In that letter he also requested local reconsideration.  The Commissioners raised no assessment.
6.	Unknown to the Appellant or his representative we find Mr Bell had in fact referred the matter on to Mrs Irene Parkes who also gave evidence.  She in 2001 also disputed the method used by the Appellant and argued in her letter of 8/11/2001 Tab E8 that his supplies came within TOMS.  She reiterated that the supplies could not come within Schedule 5 but gave no reasons for her decision.  She invited the Appellant to appeal that decision which he did.  
7.	Mrs Parkes did not in the witness box make any reference to her decision to apply TOMS to the Appellant’s service, until reminded by the Chairman that that had been her principal argument for some time, which she conceded.  She told the Tribunal and we find she was satisfied that some of what the Appellant may do, may come within Schedule 5 paragraph 3 but not the invoice at Tab 3 pp5-10 since the Appellant did not appear to her to have acted as a producer in that case.
8.	The Appellant is certain he produced precisely what the American customer wanted.  The job was his first and so far only instructions from a client outside the EU, in this case the United States of America.  He did not enter a legally binding contract with The Production Company of Boston his American customer.  He issued an estimate in terms similar to the invoice, which was verbally accepted.  He accepted some risk attached to this but considered it an investment risk worth taking for new business.  He undertook the job on a commission basis.  It was to arrange the production of various scenarios, including a boxing match, and a golf match.  He did all the production work, providing staff, locations, transport and buying in and providing hotel accommodation.  These particular photographs had won an award for their production in America.  He is self-employed.  He works freelance.
9.	The Appellant had undertaken many investigations with regard to the VAT treatment of invoices for his business including the VAT National Helpline who referred him to a VAT officer who specialised in film directors and producers.  He had spoken with the National VAT Helpline again the day before the Tribunal and had again been referred to a specialist officer to whom he spoke.  Her name was Claire Heaton and she was a supervisor and quoted him a reference AWP3440.  He explained exactly what he did including the provision of all the services noted in the invoice Tab 3 pp5-10.  She advised that the correct treatment was not to charge VAT.  
10.	Mrs Parkes objected to the Appellant’s evidence about the National Helpline which he had put to her in the witness box, as she was unaware of what the Appellant had narrated to the officers.  However the Appellant was in the same identical position as Mrs Parkes as she had referred her decision to the Policy Department of the Commissioners to what she described as International Services.  She gave no information on what she narrated to them at all nor did she tell the Tribunal what their replies or recommendations were.  
11.	The Tribunal finds that the Appellant may have given a general description of his services, as he gave to the Tribunal that he provides skills which are special to him as an individual to achieve a particular result as requested by the customer.  To that end he showed a video at the Tribunal, of which he was the producer.  It was material for the Scottish Tourist Board (STB) such as might be shown to potential visitors to Scotland.  Subjectively it was entrancing for the Tribunal to see.  Objectively it showed the words “Producer Iain Hopkins”.  He assured the Tribunal and we find that all the arrangements for the American customer’s photo shoot were the same as for the STB video.  This included lighting arrangements.  It included early rising to catch the proper early daylight or in some cases abandonment because of poor weather, artificial lighting where necessary, with the provision of electricians the hire of lighting equipment etc.  It included ensuring a proper location, provision of the necessary activity such as we had seen in the video namely sailing, rowing, visiting historic homes and so forth.  In the case of the invoice under dispute the boxing ring with two boxers he arranged in a secure boxing environment in Lanarkshire.  In the case of the provision of a golf scenario he arranged this at a suitable golf course with genuine golfers.  He had to produce all of this and manage the resources.  He needed all the associated services in order to do so.  
12.	The American customer had sent over its own photographer, and one other person who acted in an advisory capacity of Production Manager/Artistic Director.  This person did not take over or run the production.  This man observed the production and occasionally requested minor changes to lighting, or to a pose.  A third person was from the Whisky Company’s own advertising agency.  The Appellant’s skills were paramount.  The American customer’s staff knew what the end product was intended to look like but could not of their own accord have produced the necessary locations, scenarios, lighting and effects or production, at the price quoted by the Appellant.
13.	The Appellant was responsible for all aspects of health and safety, first aid, insurance, insurance waivers, advising the fire services, police services and all other public bodies where necessary of the production activities.  The industry is heavily unionised.  He was responsible for observing hours of work and other such matters.  His expertise extended to advice on cost.  The American customer had wished to have the golfing scenario in St Andrews.  It would have cost £5,000 to close the Old Course and use it for photographic advertising purposes for one hour.  That was too expensive as the risk of poor weather is always there.  The Appellant had found a much cheaper option.  This was his only non-EU client ever.  He did not always provide accommodation from his own resources at Woodside Lodge in which he was involved with his family.  He gave as an example that the Scottish Tourist Board often offered accommodation free to agencies to encourage Scotland as a location.  
14.	The Appellant had sent material to the Commissioners which they had ignored to such an extent they could not appreciate what he did in his work.  The Appellant was satisfied he was a producer and as such was entitled to treat all of the services he provided to the American customer as outwith the scope of United Kingdom VAT.
15.	We find Mrs Parkes claimed to have received no information from the Appellant on the work he performed.  That argument was fully sustained throughout the whole of the Commissioners’ Statement of Case, and in all their information provided to the Tribunal she claimed that there had been repeated requests for information.  Indeed even before this Tribunal there was a request before the Tribunal being a motion by the Commissioners for Further and Better Particulars to be allowed against the Appellant on 1 March 2004.  It was in fact disallowed but it contained the allegation that no further information had been provided by the Appellant.  She had received no copy contract certainly.  That had been explained by the Appellant to her so that the invoice was effectively the terms of engagement.  The Appellant elicited from her in evidence and we find that he had provided a portfolio, and a video for her to look at, and information on his website, in respect of which findings are made later and that he had had correspondence through his agents with her.   The correspondence at Tab E5 had suggested an assessment would be an appropriate way forward.  The letter at Tab E5 had also requested local reconsideration.  There appears never to have been a specific reply to that letter sent to the Appellant, and no assessment ever raised on the invoice which is the subject of this appeal.  Mrs Parkes also claimed at the Tribunal that Tab E6 letter was a response.  However its dating is inked over a failed rubber stamp, and its terms were clearly a response to a much earlier letter of 09/10/01, Tab E3.  
It also mentions the conjoined appeal already referred to which we find irrelevant in the circumstances narrated above.  The letter by Mrs Parkes Tab 6 is also wholly irrelevant as it narrates her then firmly held but now abandoned understanding that the Appellant’s business services were supplied under TOMS.  In the event the Appellant’s representative wrote back denying that TOMS applied and demanding that the Commissioners issue a response to the claim that the services were provided under Schedule 5 VATA 1994.  The letter at Tab 8 resulted, without unfortunately any real determination by the Commissioners on the matter of assessment.  Mrs Parkes did at that time still sustain her argument that the TOMS should apply, and still appears confused about who the taxpayer is, and what invoice is being referred to.  It was not credible that Tab E6 was a response to Tab E5, as stated.
16.	The Appellant had later produced to Mrs Parkes the video above referred to but she had not viewed it when it was sent.  She had not in fact seen it by the time the Tribunal took place.  Mrs Parkes discounted it as it had not been made at the time the invoice had been issued.  
17.	The Appellant had shown her his photographic portfolio at a meeting in January 2003 to try to explain the work which he did.  She had forgotten about that.  The Tribunal found this was not credible.  
18.	He had invited her to look at his website which she had not done by the time the meeting between her and the Appellant took place in January 2003.  She declared that she had been unable to open the website.  He had asked her to try again.  She only looked at the pages dealing with accommodation, staff and locations.  There were 80 pages on the website.  
19.	Mrs Parkes had made e-mail requests to the Appellant for information.  In evidence she said she had received no reply.  The Appellant had asked her to take special instructions so she could open his replies as he uses an Apple Mac.  She had not, as requested, done so.  
20.	She accepted during her principal evidence that certain aspects of the Appellant’s services may well come within the terms of consultant as perceived in Notice 741 as including film directors and producers.  She would not commit herself on the aspects but was concerned about catering staff, transport and hotel accommodation being included.  She had not made enquiries of any specialist VAT policy advisers on the matter of film directors.  She had no experience in dealing with this matter.  She was referred to the B.E.C.T.U. arrangements the Commissioners had agreed with the industry.  She was not familiar with it but had had one small “one man band” included in the descriptions.
She accepted and we find that the Appellant had complied correctly with his VAT in respect of the UK customers.  We also find he complied correctly in dealing with EU traders except in respect of hotel accommodation which must be dealt with as supplied where the land is situated and therefore standard rated at all times.

Submissions
Submissions for the Commissioners
Despite the concession made by the officer Mrs Parkes during her evidence and that of Mr Bell that at least part of the Appellant’s services may be entitled to be treated as outwith UK VAT it was submitted by Mr Scott, that the whole of the service supplied by the Appellant should be Standard Rated under Section 7.  With regard to the place of supply he has submitted that under Section 7(11) the Government had provided SI 1992/3121 for a definition of supplies which could be treated as ‘where received’.  This in turn is qualified by including a reference to the services of the description contained in Schedule 5 paragraph 3.  He submitted that the determination of this Tribunal required to be whether the Appellant was within the description of a “consultant” “film producer”.  If he was the services supplied to a customer who was not UK or EU based would be outwith UK VAT with the exception in all cases of the provision of hotel accommodation.  This, he submitted is specifically excluded by Article 5(a) (iii) of SI 1992/3121.  He submitted that the Appellant did not have control of the proceedings as envisaged in the B.E.C.T.U. Agreement.  He advised that as far as the Commissioners were concerned the control was with The Production Company of Boston, the American customer.  The Appellant had not produced contract arrangements showing that he had control of the proceedings.  Mr Scott quoted the cases at Tab A4 and Tab A6 to show that the Appellant could not be deemed a consultant under the provisions of Schedule 5 paragraph 3.  However he submitted the B.E.C.T.U. Agreement made it clear that where a person was carrying out film and photographic work in the entertainment industry then consultancy services had a much wider meaning.  In particular the Customs and Excise Notice 741 included the services of Film Directors or Producers where their services were not already covered by Schedule 5 paragraph 1 (copyright etc).  He submitted that since the services which the Appellant provided were production services and that the Appellant was not a producer he could not come within the definition of a consultant in Schedule 5 paragraph 3.  

He also went on to submit that as in the case of Card Protection Plan Tab A7 in his list of authorities the supply should be treated as a single supply and not be broken up into different services.  He believed that any split of the services would be artificial.  All the services should be standard rated.  He submitted that the appeal should be refused.

Appellant’s submissions
The Appellant submitted that the authorities could easily be distinguished since not one related to film production.  He submitted that he had followed all the VAT standard procedures for all production companies.  He regarded himself as self-employed, freelance and a film producer.  His professional abilities and expertise were very specialist and he had taken advice.  He was the producer.  He was not a Production Manager or an Art Director.  He had shown he covered all aspects of production.  He himself had to provide production managers as was shown on his website.  He was in no doubt that he was a consultant within Schedule 5 paragraph 3.  He was satisfied he came within the descriptions contained in the Customs and Excise Notice 741 on the place of supply of services.  He was satisfied he supplied his services to The Production Company of Boston, his American customer who was using his services exclusively for advertising in the United States of America.  He submitted that his failure to produce a copy of the contract was because there was no contract.  He had taken a risk.  It was a commercial risk which he considered he was entitled to take.  He also had supplied information when requested.  Mrs Parkes had only asked what he did.  He had tried to explain that by sending a video, sending a brochure, showing her his portfolio so far as that was possible as he could not always retain material.  He sent details of his website and generally provided as much information as he could as well as attending a meeting to try to satisfy the Commissioners’ requirements.  They had had the invoices from the outset.  He had not been issued with an assessment.  He had not been told until today that Mrs Parkes agreed that any part of his services could ever be Consultancy Services.  He agreed with the submission that it was a single supply but he believed that all of what he supplied should be outside the scope of VAT so far as the Tab E3 invoice was concerned.  The film industry was heavily unionised and even the Commissioners had had to enter into an agreement with the Union in order to cover certain aspects of work which had to be deemed to be performed where received which is precisely the circumstances in which he found himself.  He had found it difficult to deal with the total lack of coherent argument from the visiting officer Mr Bell or Mrs Parkes.  He asked for his appeal to be allowed.

Decision
We find that the Appellant in respect of the particular invoice Tab E3 pp5-10 was the producer in control of proceedings as envisaged in the B.E.C.T.U. Agreement, and as provided in Schedule 5 Group 3.  We find that all the services with the exception of the hotel accommodation was outwith the scope of UK VAT.  In the alternative since in relation to this particular invoice all the services related to advertising whisky all these services with the exception of the hotel accommodation may come within Schedule 5 paragraph 2.  Although this was not argued before the Tribunal we believe the production of the advertising material with the exception of the hotel accommodation may come within Schedule 5 paragraph 2 relating to advertising services.  However since this was not argued before the Tribunal it would be open to both parties to reconsider the matter and failing agreement come before the Tribunal again on this matter should this prove necessary.  It appeared to the Tribunal that if the Appellant was relying on Customs Notice 741 11.15 with regard to “similar services” then he and we must also be prepared to accept the terms of paragraph 4.5 “examples of land related services” which includes the supply of hotel accommodation.  It should be pointed out however that in relation to VAT generally supplies in relation to land are generally exempt supplies although the supplies of services in relation to land are standard rated.  However supplies in relation to land which are excluded from exemption do specifically include hotel accommodation which would normally be standard rated.  The Tribunal was satisfied on this ground that supplies in relation to land can be treated as including hotel accommodation.

The Tribunal did not wish to artificially split what was claimed to be a single service or a single supply but we had no difficulty in determining that although the Appellant had perhaps made the arrangements he could not be deemed to make the supply where received as outside the UK in the case of hotel accommodation.  

For the avoidance of doubt we find the transport services can be treated as part of the consultancy services in terms of SI 1992/3121 para 17.  

So far as any EU invoices are concerned we find these still require to be determined as no explanation of the specific priorities of the Appellant was given.  There may also be additional invoices of which the Tribunal is unaware which merit consideration.  Decisions about these may still require to be made though like the American customer’s invoice any assessment may be time barred.

Reasons for the Decision
We were satisfied that the Appellant had made every effort to comply with the VAT regime which applied to his services.  We were satisfied the Appellant had produced sufficient material for the Commissioners to make a decision on his liability in respect of the invoice Tab 3 pp5-10.  We found the Appellant credible and persuasive.  The Commissioners had opted instead to offer the Appellant the opportunity to dispute the Decision which was principally that the Commissioners held him to be operating under TOMS.  When they made this decision the Appellant appealed.  He held at the outset and still at the Tribunal that he was outside the scope of VAT making supplies outside the EU.  The zero rating of EU supplies is a different issue not fully argued before this Tribunal though we comprehend the methodology.  The Tribunal was not invited to do other than consider all the Appellant’s services to be standard rated.  The Tribunals findings in fact may assist the further decision making if the matter is pursued by the Commissioners.

The photographs for which he was producer and which had won a prize in the United States were supplied to an American customer for distribution only in the United States.  He actually therefore exported the services which were also a “means of advertising” to be used solely for advertising Scottish whisky in the United States of America.  We therefore considered that in the alternative such services may also be capable of interpretation as advertising services.  It also appeared to the Tribunal that since the Commissioners had entered into the B.E.C.T.U. arrangement in respect of film directors and producers the various authorities quoted in the list of authorities were not necessarily relevant except where so expressed in this decision.  So it is clear from the text of the B.E.C.T.U. arrangement the film directors and producers are clearly within the term “consultants” and “consultancy services”.  It is also clear from SI 1992/3121 that such services include a great deal more than simply the activities of the individual involved in providing the consultancy.  However we were satisfied as previously expressed that supplies of land relate to a place where the land is situated in accordance with SI 1992/3121 paragraph 5.1.3.  

Expenses
The Appellant is awarded the cost of the specialist advice he obtained in light of his partial success.  No other expenses are awarded to or by either party.

MRS G PRITCHARD, BL., MBA., WS

CHAIRMAN

RELEASE:  21 APRIL 2004 
EDN/01/201