UNIVERSITY COURT OF THE UNIVERSITY OF GLASGOW v Revenue & Customs [2006] UKVAT V19885 (4 October 2002) 

                                                                                                 19885

Input tax – exempt supplies – attribution – whether rejection of one proposed amendment to a special method operated was fair and reasonable – jurisdiction – review not appellate.  VAT Regulation 1995: 101-3 – Appeal refused.

EDINBURGH TRIBUNAL CENTRE

UNIVERSITY COURT OF THE UNIVERSITY OF GLASGOW	           Appellant

-	and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE 	 Respondents

Tribunal:	T Gordon Coutts, QC (Chairman)
Miss Karen Bruce Lockhart, WS
Mrs Charlotte Barbour, CA, ATII

Sitting in Edinburgh on Thursday 25 July and Friday 20 September 2002 

for the Appellants		C Rumbles, Taxation Consultant

for the Respondents		Peter Mantle, of Counsel

© CROWN COPYRIGHT 2002

DECISION

	Introductory

	The University as a purveyor of both exempt and standard rated supplies operates a special method of input tax recovery.  The appeal is in relation to a letter of 22 October 2001 sent by the Respondent refusing to allow the University to adjust and backdate their current special method.  That letter, to which reference will be made later, outlines the then current position in relation to input tax recovery and the reasons for non-acceptance by the Commissioners of the Appellant’s proposal.

	The true intent of that proposal may be summarised as an application to the Commissioners to vary the existing special method by allowing separate accounting for a sports facility operated by the University and known as the Garscube Facility.  It should be noted at this stage that the Commissioners’ letter merely refused the then proposal; it did not rule out any amendment to the University’s overall special method which had been previously agreed.

	The Statutory Framework
	The provider of both exempt and standard rated supplies may recover income tax by way of a “standard” method set out in paragraph 101 of the Value Added Tax Regulations 1995.  However in terms of Regulation 102 and 103 it is provided that the Commissioners may approve or direct a method other than that specified in 101 – a “special method”.  It is also provided that any direction shall take effect from the date upon which it is given or some later date. The Regulations are silent as to the date to apply to an approval by agreement and it is in our view plain that the Commissioners may allow a special method to apply retrospectively. There is however no provision which compels them to do so and it remains a question to be considered in each case whether a refusal to apply a change retrospectively was unreasonable in the sense that no body of Commissioners acting reasonably could have so refused.  See Chartered Institute of Physiotherapy v The Commissioners (LON/97/185) for a concise and, in our view, accurate summary of the appropriate considerations.

Background
	Arguments in relation to this Garscube sports complex were put before this Tribunal in an earlier appeal which was withdrawn. That earlier appeal appeared to proceed on the basis that input tax could be recovered on a variation of a special method to which the Commissioners had not agreed. That contention being unsustainable the parties were invited by the Tribunal to consider their whole position. The result was the present decision letter and this appeal. The grounds of appeal were not particularly clear but appeared to make a contention that the Commissioners wee in error in rejecting proposals for Garscube proposed without any consideration of the University’s special method as a whole. It was contended that that was an improper view to take because the Commissioners were demanding a consideration of other activities of the University within the sphere or sport and recreational facility provision.

	It was stated by the Appellant that the issues in the appeal were, whether the Appellant had the right to make an application to change the method of VAT recovery in respect of a capital item; the basis on which the Commissioners refused that application and the right of the Appellant to have the application accepted and applied retroactively.

	The Commissioners’ position was that the proposal they were invited to consider would not have produced a fair and reasonable apportionment; that the proposed variation to the method only related to Garscube, one out of several recreational facilities operated by the Appellants and that in any event the method of calculation proposed by the University was flawed. It was reasonable for the Commissioners they argued, to look at the proposed method overall to consider whether it produced a fair and reasonable result or whether the effect of the proposed variation would introduce unfairness or unreasonableness.

	Jurisdiction of a Tribunal
	This Tribunal accepts previous decisions of other Tribunals in the London Tribunal Centre, in particular B.M.W. (GB) Ltd v The Commissioners (LON/96/733) following John Dee v The Commissioners, 1995 STC 941.

	The jurisdiction of the Tribunal is limited to deciding whether the decision had been reasonably taken.

	The Evidence
	The Tribunal heard evidence from Julie Ommer the Appellant’s Director of Sport and Recreation. She described, at some length, the facilities provided at Garscube and elsewhere by the University. There can be no doubt that the Garscube facilities are special and of a high quality – evidenced by the fact that commercial use can be made of them by the University by letting out pitches to football clubs such as Arsenal and Leeds, Celtic and Rangers. No doubt this provides a satisfactory income from which provision can be made for sport and recreational facilities so that the student body as a whole can benefit.

	The facilities that she described as being provided were varied and various.  There are football, hockey and rugby pitches, a shinty pitch, muscle conditioning areas, a jogging trail, changing rooms, committee rooms (which were sometimes let out). The use of the facilities was made by students, persons attached to the University and to University related enterprises nearby. Those persons may pay a subscription for the term or session.

	There were however also other University provided sport and recreational facilities. These were at their Stevenson building, not put forward for any special treatment, of which the students made very considerable use and there were other facilities provided at St Andrews Campus at Bearsden. In the Stevenson building there were swimming facilities.

	The extent of the income and the extent of the use of Garscube was extensively documented and although the results were not wholly accurately translated into the proposal made to the Commissioners the variations from accuracy so far as Garscube was concerned were not so material as could not have been adjusted. The proposal presented to the Commissioners in fact omitted certain income producing activities at Garscube.

	Mr Brunton, a partner in the firm of RCB of which Mr Rumbles the Appellants representative is also a partner, agreed in cross examination that the Appellants had been invited to look at the special exemption method as a whole and that what was being sought by them was approval of a new special method retrospectively. It would follow on from that that adjustments thereafter to the deduction of input tax on capital items could be made on the basis set out in the Regulations.

	Mrs McDonough who was the officer principally involved in the matter from the Respondents unit stated simply that the reasons for the decision in the letter were that it was felt that the whole of the issue of Garscube had not been addressed in the proposal made and that Garscube could not be isolated. It was part of a whole Department in the University. If sports facilities were to be sectioned off the other sports facilities of the University should be within that section.

	The contentions for the Appellant appeared to be that it was entitled to have varied to its benefit the special method used by excluding from consideration of the generality the particular activities at Garscube.

	The contentions for the Respondents may be summarised as saying that such an approach was neither fair nor reasonable.

	Decision
	The Tribunal could see no fault or flaw in the Commissioners approach. It is manifest that the University supplies exempt facilities to its membership in respect of its sports facilities. It is also apparent that in connection at least with the Garscube facility standard rated supplies are made on a commercial basis. The provision of sporting facilities to students and others connected with the University which is exempt requires in our opinion to be considered as part of a University-wide activity.  In that regard it is neither fair nor reasonable to “cherry pick” Garscube as being the place where input tax recovery might be made to obtain that benefit while ignoring the University’s general activities within the sector.

	An example of appropriate sectoring or “tunnelling” was provided by the Appellant who produced to us a special agreement in relation to the University’s halls of residence. That agreement addressed a complete sector of provision; the present  proposals did not.

		On the basis of the material before them accordingly the Commissioners were fully entitled in the exercise of their discretion not to agree a variation to the existing special method. Since it is the University who are seeking the variation the Tribunal would require to be satisfied by them that the proposed variation was one which it would be unreasonable for the Commissioners to refuse. It is the view of the Tribunal that that stage has not yet been reached. There is no question, as was contended by the Appellants, that in some way the Commissioners are asserting that the Appellants are not entitled to seek a change in a special method.  However it is absurd to suggest that the Commissioners are precluded from considering when dealing with a question of the alteration of a special method the whole sector within which Garscube operates.  The proper approach to a variation has not been made or considered so far. What the result of such consideration might be would at this stage be speculation, but it is for the proposer of the variation to establish that the method operated in the past has ceased to give fair and reasonable attribution of input tax to taxable supplies.

		The appeal fails and will be dismissed. Dismissal of this appeal however does not preclude the University from seeking properly to establish to the Commissioners satisfaction that the current special method which is and remains in operation does not produce a fair and reasonable result. What is unreasonable in the mind of the Tribunal is to suggest that you can take out a specific area of activity from a special method without consideration of the effect of that on the appropriateness of the existing special method as a whole.  It may be that the correspondence between the parties has tended to confuse rather than clarify what should be a simple proposition by over-concentration upon Garscube. However the position now reached is in our view summarised in this paragraph.

T GORDON COUTTS, QC
CHAIRMAN

RELEASED:   4 OCTOBER 2002

EDN/02/11