19848
VALUE ADDED TAX – supplies of children's car seats — VATA 1994 Sch7A — pedal cycle trailers designed for transporting children — whether "children's car seats" — no — appeal dismissed
MANCHESTER TRIBUNAL CENTRE
CENTER PARCS (UK) GROUP PLC Appellant
THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: Colin Bishopp (Chairman)
Sitting in public in Manchester on 25 September 2006
Jason Hill, counsel, instructed by Vatsolved Limited, for the Appellant
Lisa Linklater, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2006
DECISION
- In this appeal I am concerned with the correct VAT treatment of the supplies by way of hire which the Appellant makes to its customers, when guests at its holiday parks, of trailers for attachment to bicycles. The trailers are designed to accommodate young children, who can by this means be towed behind a bicycle ridden by a parent. The Appellant says that the supplies are subject to VAT at the reduced rate of 5 per cent while the Respondents maintain that tax at the standard rate of 17.5 per cent is due. Relying on its view the Appellant submitted a voluntary disclosure by which it sought to recover the output tax for which it had accounted at the standard rate but which, it now contends, was due only at the reduced rate. It now appeals against the Respondents' rejection of that disclosure.
- The trailers consist of a compartment containing seating accommodation, supported on a suspension to which are attached two wheels, one on each side. To the front of the seating accommodation is a metal towing bar which is attached to the bicycle by what its manufacturers call a hitch. The hitch is so designed that the bicycle and trailer can articulate, and the whole can safely be ridden around corners. The trailer itself consists of a tubular aluminium cage to which are secured a seat and back rest, a foot rest and safety belts by which the child or, in the case of the models which I am concerned, the two children, which the trailer can accommodate may be secured. The aluminium tubing is so arranged that its occupants are protected should the trailer overturn; even so, the manufacturers recommend the wearing of helmets. The trailer can be left open to the elements or instead may be enclosed by means of fabric and plastic sides and roof. The trailers also have some provision for the carriage of shopping bags. Some models are available, as an optional extra, with an attachment which enables the trailer, once uncoupled from the bicycle, to be used as a pushchair. However, the Appellant did not supply that attachment to its customers, and I am concerned only with the basic trailer.
- The Appellant's case, as it was put by Jason Hill of counsel, is that the trailer falls within Group 5 of Schedule 7A to the VAT Act 1994; if that is so, section 29A of the Act operates to apply the reduced rate of VAT, currently 5 per cent, to the supplies. So far as presently material, Group 5 reads as follows:
"Item No.
1 Supplies of children's car seats.
NOTES:
Meaning of 'children's car seats'
1 (1) For the purposes of this Group, the following are 'children's car seats'—
(a) a safety seat;
(b) the combination of a safety seat and a related wheeled framework; …
(2) In this Group 'child' means a person aged under 14 years.
Meaning of 'safety seat'
2 In this Group 'safety seat' means a seat —
(a) designed to be sat in by a child in a road vehicle,
(b) designed so that, when in use in a road vehicle, it can be restrained –
(i) by a seat belt fitted in the vehicle, or
(ii) by belts, or anchorages, that form part of the seat being attached to the vehicle, or
(iii) in either of those ways, and
(c) incorporating an integral harness, or integral impact shield, for restraining a child seated in it.
Meaning of "related wheeled framework"
3 For the purposes of this Group, a wheeled framework is 'related' to a safety seat if the framework and the seat are each designed so that -
(a) when the seat is not in use in a road vehicle it can be attached to the framework, and
(b) when the seat is so attached, the combination of the seat and the framework can be used as a child's pushchair."
- In construing those provisions it is necessary also to examine article 12(3) of, and Annex H to, the Sixth VAT Directive (77/388/EEC), which provisions were inserted in the Directive by EEC Council Directive 92/77, article 1. Article 12(3) permits Member States to apply a reduced rate, of not less than 5 per cent, to supplies of any of the goods and services listed in Annex H. That Annex begins with the words "In transposing the categories below which refer to goods into national legislation, Member States may use the combined nomenclature to establish the precise coverage of the category concerned." Included among the goods listed, at item 4, are "children's car seats", without further elaboration.
- Mr Hill's argument was that the reference in the preamble to the use of the combined nomenclature (that is, Annex 1 to Council Regulation 2658/87 which provides a comprehensive categorisation of goods for the purposes of the application of customs duties) conferred on the Member States a wide discretion to interpret the term "children's car seats" as they chose. The United Kingdom had chosen, in Item 5 of Schedule 7A, to adopt an extensive definition, apt to include the trailers. Although the term "children's car seats" had been used, to give a general description of the items included in the group, the notes made it clear that the term had an extended meaning in the context of the domestic legislation. The item was not restricted to a seat designed to be placed inside a car and the Commissioners' own guidance notes did not so restrict it, since they used the term "vehicle" rather than "car" and it was plain that they allowed the application of the reduced rate to supplies of seats suitable for use in vans and other vehicles—indeed the notes to Group 5 themselves also used the word "vehicle" rather than "car" and it was plain therefore that the Group was not limited to seats suitable for installation only in cars.
- If one put aside the notion that the seat had to be suitable for installation in a car, it was plain that the trailers fell within Group 5. Once the trailer was attached to the bicycle, the whole contraption amounted to a vehicle. There was no occasion for importing the notion that the vehicle must be motor driven, since no such requirement was to be derived from the notes. A bicycle was suitable for use on a road, and was commonly so used; and bicycles are subject to the provisions of the Road Traffic Acts. The condition that the seat was designed to be sat in by a child in a road vehicle was therefore satisfied. The trailer, and the seat with it, were restrained by means of the attachment to the bicycle, which must be considered to be an anchorage; thus note 2(b) was satisfied; and the child within it was restrained by seat belts attached to the framework of the trailer, so satisfying note 2(c). Additionally, although his clients did not in fact supply the accessory which enabled the trailer to be used as a pushchair, such an accessory was available and, if used, note 3 would be satisfied.
- For the Respondents, Lisa Linklater of counsel first drew my attention to versions of the amending directive in other languages. In the French version, the term used was "sièges d'enfant pour voitures automobiles"; in the Dutch "kinderzitjes voor motorvoertuigen"; in the German "Kindersitze für Kraftfahrzeuge", and in the Italian "seggiolini per bambini installati negli autoveicoli". It was plain from those versions, she said, that the draftsman had in mind mechanically propelled vehicles. Domestic legislation must be interpreted, so far as practicable, in a manner which respected the purpose of the corresponding European legislation: Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990] ECR I-4135.
- Mr Hill's proposition that the United Kingdom had a discretion in how it implemented Annex H was incorrect: although article 12(3) permitted Member States to apply the reduced rate to any of the items set out in Annex H, it did not authorise them to interpret the items specified in Annex H in a liberal fashion. Mr Hill's approach, in any event, required the language of Group 5 to be stretched to an unacceptable extent. The domestic legislation was aimed at seats which were placed inside vehicles. If Mr Hill was right in saying that the bicycle and trailer combined constituted a vehicle, the seat was not placed into that vehicle; it was an integral part of it. Similarly, Mr Hill's argument that the seat was restrained by the attachment to the bicycle did not stand up to scrutiny; the legislative requirement was that the seat be restrained by something attaching it to the vehicle. The only vehicle in that context must be the bicycle itself; but if that was so the conditions imposed by Note 2 could not be satisfied that since the seat plainly was not "in" the bicycle, nor indeed could it be. It was, she said, perfectly obvious that the Sixth Directive did not permit, and Parliament had not intended, the application of the reduced rate to bicycle trailers for use in holiday parks; it was intended to apply it to children's car seats, as that term is commonly understood.
- I have no doubt that the Respondents' arguments are to be preferred in this case. It seems to me quite clear from an examination of the other language versions of the amending directive that mechanically propelled vehicles were in contemplation. In modern English usage, the word "car", when used without any qualifying adjective, is synonymous with "motor car" and the use of the longer term would generally be considered to be pedantic. I am quite satisfied that only motor cars were intended, and for this reason alone the Appellant's contentions must fail. But even if vehicles propelled otherwise than mechanically are included, it does not seem to me that these trailers qualify for the application of the reduced rate. I agree with Miss Linklater that the Appellant cannot have it both ways: either the bicycle and trailer, together, form the vehicle, in which case note 2(b) is not satisfied, or alternatively the bicycle alone is the vehicle, in which case note 2(a) cannot be satisfied. Furthermore, examination of the trailer showed that while the seat itself—by which I mean the cushion, the backrest and the footrest—is attached to the framework, the seat does not incorporate the harness which restrains the child; the restraining belts are fixed to the framework. Thus note 2(c) is not satisfied. If instead it is considered that the trailer itself constitutes the seat, Miss Linklater's objection that, if the requirement of note 2(b) that the seat be restrained is to be satisfied, the bicycle alone must constitute the vehicle seems to me to be insuperable: however one considers the contraption, the child is not in the bicycle.
- I should add that I am also not persuaded by Mr Hill's argument that the reference to the combined nomenclature means that Member States might use the nomenclature in any manner they think fit. Rather I think it means no more than that a reference to the nomenclature might be an appropriate means of defining precisely any item to which the reduced rate is to be applied. I do not accept that it was the intention of the Council to specify various supplies, and then leave the Member States to interpret them in a manner which brings into the scope of the reduced rate items which bear no real resemblance to those listed in the Annex. I am also not persuaded that the possibility that the trailer might be used as a pushchair makes any difference. In my view the purpose of note 1(1)(b) is to extend the reduced rate to supplies, together, of a safety seat and related wheeled framework (supplies which the Appellant does not make), but not to change the concept of a safety seat.
- The appeal must be dismissed. Miss Linklater did not seek a direction in respect of costs in the Commissioners' favour and I will therefore make none.
COLIN BISHOPP
CHAIRMAN
Release Date: 24 October 2006
MAN/05/741
