19786

VAT charged on registration fees by British Waterways Board for the registration of a pleasure boat and grant of a pleasure boat certificate in respect of certain rivers under the management of the Board - whether VAT properly chargeable - public rights of navigation - effect of British Waterways Act 1971 - appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

STEPHEN RICHARD PETERS 

										Appellant	 
                                                            and

HER MAJESTY’S COMMISSIONERS
OF REVENUE AND CUSTOMS
										Respondents 
                                                            and

                            BRITISH WATERWAYS BOARD                                     Intervener

Tribunal:   Elsie Gilliland (Chairman)
                    Susan Stott FCA CTA (Member)

Sitting in public in Birmingham on 18 September 2006.

The Appellant appeared in person

Caroline Neenan, counsel, instructed by the acting solicitor for HM Revenue and Customs for the Respondents

Rupert Baldry, counsel, instructed by Ernst and Young for the Intervener

© CROWN COPYRIGHT 2006

                                     
                                                                DECISION

1.	 This is an appeal by Stephen Richard Peters (the Appellant) against a decision dated 10 February 2005 of Her Majesty’s Customs and Excise (now Her Majesty’s Revenue and Customs) (Customs) that the British Waterways Board (the Board) is entitled to charge value added tax (VAT) on river only licences issued by the Board permitting the holder to use and keep a pleasure boat on river waterways as defined in Schedule 1 to the British Waterways Act 1971 (the 1971 Act). The Board is a party as an intervener to the proceedings and agrees with Customs that it (the Board)  correctly charges Vat on the fee paid to it by the Appellant. There is no dispute that the Appellant applied for and obtained such a licence and that VAT at the standard rate was charged by the Board on the fee payable to the Board for the licence. By a letter dated 6 January 2005 to Customs the Appellant challenged the right of the Board to charge VAT on the fee on the basis that the charge which was made by the Board was a charge only for the registration of the Appellant’s pleasure boat and was not a charge for a licence to use the river waterways under the control of the Board. The Appellant in his letter asserted that the Board was not the beneficial owner of the river beds for which it was the navigation authority and that the licence issued by it was not in fact or in law a licence since the public had a right to be on the rivers in question and did not require any permission in the form of a licence. Customs in their decision letter dated 10 February 2005 stated that as the Board was registered for VAT, it was entirely appropriate to charge VAT at the standard rate on the charge made on the registration of the Appellant’s  pleasure boat with the Board.

2.	Whether the Board is entitled to charge VAT on the issue of a pleasure boat certificate depends upon whether the Board in registering a pleasure boat is making a supply of services within the Value Added Tax Act 1994 (the 1994 Act). By s.5(2), subject to Schedule 4 and to any order made by the Treasury, “supply” is stated to include “all forms of supply, but not anything done otherwise than for a consideration” and it is also provided that “anything which is not a supply of goods but is done  for a consideration (including if so done, the granting, assignment or surrender of any right) is a supply of services”.   The Appellant’s principal submission is that there is a public right of navigation  over and along the rivers in question and that accordingly he does not require any permission from the Board to place his pleasure boat on the rivers or to cruise along them. He has submitted that there has been no supply of a service by the Board and no VAT is chargeable. All that has occurred he contends is that he has been required by law to register his pleasure boat with the Board and the fee chargeable is paid simply for the act of registration and not for the grant of any right or permission to use the waterways in question.

3.	Schedule 1 to the 1971 Act lists 10 stretches of river which are defined as river waterways for the purposes of that Act  and by s.5 it is provided that it shall not be lawful to keep let for hire or use any pleasure boat on a river waterway unless a certificate called a pleasure boat certificate in relation to the pleasure boat is in force or unless a licence has been issued by the Board allowing the use of all inland waterways without further payment. A fine is imposed for the use of a pleasure boat on a river waterway without the appropriate licence. S.7 of the 1971 Act provides that “ there shall be paid to the Board for the registration of every pleasure boat to be used on a river waterway and for every renewal of the pleasure boat licence such charge as the Board may from time to time determine…” 
 
4.	Four distinct issues arise in this appeal. The first is whether a public right of navigation exists over the river waterways specified in Schedule 1 to the 1971 Act. It is the Appellant’s case that a public right of navigation does exist over these river waterways and that as a member of the public he is entitled to make use of the river waterways. The second is whether the Board provides services in relation to these river waterways. The third is whether the Board is entitled to make charges for any services it provides. The fourth is whether the  Board in making a charge for the registration of a pleasure boat  and issuing a pleasure boat certificate pursuant to s.6 of the 1971 Act is supplying  those services for a consideration to the holder of such certificate.

5.	Prima facie all waters which are tidal and on which navigation is possible are subject to a common law public right of navigation. The basis for this is that the bed or soil of tidal rivers, like the seashore, belongs to the Crown. See Halsbury’s Laws of England vol.49(3) para.760.Conversely there is no general public right of navigation on non- tidal waters in a river because the bed or soil of such river will normally be vested in the riparian owners who can determine who may pass over the waters on their property. See Halsbury’s Laws of England vol.49(3) para.772. However a public right of navigation over non-tidal waters can arise as a result of (1) immemorial usage, (2) Act of Parliament, (3) express grant or dedication by the owner(s)  of the bed of the river. Further, if a river or channel has been made navigable at public expense or by a public authority or has been freely devoted to the public use for a long time, then it would seem that a public right of navigation will exist. See Halsbury’s Laws of England vol. 49(3) para.773.    

6.	In the present appeal neither the Appellant nor Customs nor the Board has called evidence to establish whether the stretches of river specified in Schedule 1 to the 1971 Act are or are not subject to public rights of navigation. It is not necessary however for the Tribunal to decide this question because Customs have conceded that at least some of the rivers parts of which are listed in Schedule 1 to the 1971 Act may be subject to public rights of navigation. It is accepted by Customs and the Board that two of the rivers parts of which are listed, the Severn and the Trent,  may be subject to public rights of navigation as a result of immemorial usage. See para.17 of the skeleton argument  of Customs and Mayor and Burgesses of the Town of Nottingham v Lambert (1783) Willes 111 where the Trent was treated as a public navigable river from time immemorial. It is also not disputed by Customs or the Board that if a common law public right of navigation does exist over the river waterways, then that right has not been abolished by any relevant statutory provision  and is capable of still existing  at the present day. Accordingly neither Customs nor the Board contend that the river waterways in question are not subject to public rights of navigation.  In these circumstances, we approach this appeal on the footing, but without deciding, that the river waterways listed in Schedule 1 to the 1971 Act may well be subject to common law rights  of navigation and that for the purposes of this appeal there does exist a public right of navigation over the listed stretches of river waterway.

7.	There is in our view no doubt that the Board does provide services in relation to the stretches of river listed in Schedule 1 to the 1971 Act. The witness statement of Nigel Ian Johnson, the solicitor and legal director of the Board, has not been challenged in relation to what the Board has done or provided and we are satisfied and find that the Board does carry out work on the river waterways which enables navigation to continue over and along them. We find that the Board does maintain and repair the rivers in question and their banks. It also provides facilities where persons using the rivers may take on clean water  and dispose of waste water  and other matter and it provides shower blocks. The Board also provides and maintains weirs locks and sluices to make the rivers navigable by maintaining sufficient depths of water.

8.	Under s.10 of the Transport Act 1962 (the 1962 Act) the Board is under a statutory duty  “ in the exercise of their powers under this Act  to provide to such extent as they may think expedient - (a) services and facilities on the inland waterways owned or managed by them,…and to have due regard to efficiency, economy and safety of operations as respects the services and facilities provided by them”. By s.14(1)(d) of the 1962 Act it is provided that the Board shall have power  “ in places where those using the services and facilities provided by the Board may require them, to provide both for them and for other persons facilities for the purchase and consumption of food and drink, places of refreshment and such other amenities and facilities as it may appear to the Board requisite or expedient to provide”.

9.	A power for the Board to make charges for the services or facilities it provides (and to make its services and facilities subject to conditions) is conferred by s.43(4) of the 1962 Act. By s.43(8) of the 1962 Act the services and facilities for which a charge may be made are extended to include the use by any boat of an inland waterway managed by the Board. The river waterways are managed by the Board.

10.	It is in our view clear from these provisions that although there is a duty on the Board to provide such facilities as it considers expedient, the Board has power under s.43(4) of the 1962 Act to impose charges for the services and facilities it provides to or for users of the inland waterways which it manages. We have had referred to us some cases including some before the European Court of Justice where consideration and also what constitutes an economic activity were considered. The Appellant has contended that he has no direct link and no contract with the Board and that as there is no consideration and no business transaction VAT is not chargeable. We are satisfied that the management of waterways for which the Board is entitled to levy charges is an economic activity. Further by applying for registration and paying the fee the Appellant has a direct and personal link with the Board and as we hold below he obtains the benefits of registration which include the right lawfully to use the river waterways.

11.	If under the 1971 Act the power to make a charge for the registration and issue of a pleasure boat certificate is simply a power to make a charge for what is in substance the ministerial and clerical acts of effecting registration, then the only “service” which the Board might be said to provide to users of the river waterways is the actual certificate itself. If on the other hand the provision of a certificate can be said to entitle the  applicant to the benefit of  the services and facilities provided by the Board, then it could fairly be said in our view that the Board in registering the pleasure boat and issuing a certificate for a fee is also providing its services and facilities for a consideration which is the registration fee. There are it seems to us two  matters to consider. The first is a question of law, namely what is the legal effect of the 1971 Act? The second is essentially a question of fact, namely what does an applicant obtain in return for payment of the registration fee? 

12.	So far as the construction of the 1971 Act is concerned , there are also two features to note. The first is that by s.5 it is made unlawful to keep let for hire or use any pleasure boat on a river waterway  unless there is in existence either a current pleasure boat certificate or the Board has issued a licence for the pleasure boat allowing the use of all inland waterways without further payment. The pleasure boat certificate with which this appeal is concerned is not a licence allowing the holder to use all inland waterways without further payment. The certificate is restricted to the use of the river waterways. It does not extend for instance to the Board’s canal system. The second feature is that s.6 makes express provision for the payment of a fee for the registration of a pleasure boat . S.6 provides: “The Board on payment to them for the registration of any pleasure boat  of the prescribed charge and delivery to them on a form to be supplied by the Board of the particulars which are set out in Schedule 2 to this Act together with such additional information as the Board shall from time to time determine shall (a) assign to such pleasure boat a number (b) register such pleasure boat…(c) issue to the applicant a pleasure boat certificate…which certificate shall be subject to compliance by the applicant with the terms of any enactment relating to a river waterway.” Under s.7 of the 1971 Act  provision is made for payment of a charge for the registration of a pleasure boat. S.7 provides: “ There shall be paid to the Board for the registration of every pleasure boat to be used on a river waterway and for the renewal of the pleasure boat certificate such charge as the Board may from time to time charge in that behalf  specified in Part 1 of Schedule 3 to this Act”. Schedule 3 sets out  a series of maximum charges for the registration of pleasure boats. No question has been raised before us nor point taken as to the fee which has been charged to the Appellant for the registration of his pleasure boat.

13.	The provisions in s.6 and s.7 of the 1971 Act do lend support to the Appellant’s contention that the fee charged for the registration of a pleasure boat is a fee payable only for the registration of the pleasure boat but the 1971 Act has in our view to be read as a whole. S.5 makes it unlawful and imposes a fine for using a pleasure boat  on a river waterway without a valid certificate. The effect of s.5 is in our view to render illegal the exercise of any public right of navigation on the specified river waterways unless the pleasure boat in question has been registered and a certificate issued. It follows that the Appellant cannot assert that  he is entitled to exercise any common law right he may have to navigate the river waterways unless his pleasure boat has been registered and a pleasure boat certificate issued for which a fee is payable to the Board.

14.	The Appellant submitted during argument that the requirement to effect registration and to pay a fee was in substance the imposition of a tax and that VAT was not payable on tax. He referred as an analogy to the requirements for motor vehicles to be registered and for a road fund licence to be obtained before a motor vehicle could lawfully  be used on a public highway. However it seems to us that the position in relation to motor vehicles is different because s.5 of the 1971 Act renders unlawful the exercise of any right to use the river waterways whereas there is no similar prohibition rendering the exercise of any public right of way over the highway unlawful. What is made unlawful is not the exercise of the right of way but the failure to register the vehicle or to display a valid tax disc.

15.	The effect of a pleasure boat certificate is to render lawful what otherwise would be unlawful. It entitles the holder to make lawful use of the river waterways with his pleasure boat and it affords the holder the opportunity to make lawful use of the services and facilities provided by the Board. These include the facilities already referred to and it is to be noted that under s.12 of the 1971 Act a pleasure boat for which a valid certificate is in force is also exempted from payment of a lock toll for passing through by or over any of the locks on a river waterway. The locks are maintained or provided by the Board as part of its management of the river waterways. It would in our opinion be wrong to regard the 1971 Act as an Act which merely imposes a charge for the registration of a pleasure boat and which leaves unaffected any common law right of public navigation  over river waterways. As the long title of the 1971 Act states, the 1971 Act is an “ Act to make provision for regulating the use of pleasure boats and houseboats on certain of the inland waterways of the Board and for making charges therefor, to confer further powers on the Board and for other purposes”.  That it is the regulation of the use of pleasure boats  (and houseboats) which is being provided for is also supported by the second recital of the preamble to the 1971 Act which states: “And whereas it is expedient that the Board shall be empowered as in this Act provided to regulate the use of pleasure boats and houseboats on certain of the inland waterways of the Board and to make charges therefor”. This links the charges to the use of  the river waterways and indicates that the charges are not merely related to the act of registration. 

16.	We are satisfied and hold that on the true construction of the 1971 Act the registration fee payable in respect of pleasure boats is a fee payable not merely for the registration of the pleasure boat and issue of a certificate but also for the use of the river waterways. Accordingly the Board is entitled to make a charge through the registration fee for the services and facilities it provides. The benefits are not merely a windfall to the Appellant. We accept also the contention of Customs that the services and facilities provided by the Board are adequate consideration for the imposition of the charge.

17.	The appeal is dismissed.

18.	No application has been made for costs and we give no direction in relation to costs

ELSIE GILLILAND
CHAIRMAN
Release Date:  9 November 2006

	Man/05/0135