20439
EXEMPTION — public already admitted to zoo paying separate fee for animal encounters — tax liability of the animal encounters — do they fall within Item 2 Group 13 Schedule 9 VAT Act 1994 — no — appeal allowed 

MANCHESTER TRIBUNAL CENTRE

 
 	TWYCROSS ZOO EAST MIDLAND
					ZOOLOGICAL SOCIETY LTD	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: Lady Mitting (Chairman)

Sitting in public in Birmingham on 17 October 2007

Ms Philippa Whipple, counsel for the Appellant 
 
Ms Valentina Sloane, counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	The decision under appeal is that of the Commissioners notified in a letter dated 20 June 2006 and confirmed on reconsideration by letter dated 6 November 2006 that “animal encounters” supplied by the Appellant to members of the public are exempt from VAT as falling within Item 2(a) Group 13 Schedule 9 Value Added Tax Act 1994.  
2.	The Commissioners called no oral evidence and on behalf of the Appellant, oral evidence was given by its Finance and Administration Manager, Mrs Anne Marshall.  Also on behalf of the Appellant an unchallenged witness statement was put into evidence from the Executive Director, Mrs Suzanne Boardman.  
3.	Originally also under appeal was a ruling of the Commissioners with regard to animal adoptions, this issue being resolved by letter dated 9 October 2007 when the Commissioners accepted the Appellant’s argument that the adoptions constituted a single standard rated supply.  I was asked by both parties to formally allow the appeal in respect of the animal adoptions which I hereby do.  There was an issue as to costs which I refer to at the conclusion of this decision.
The issue before the Tribunal 
4.	The sole issue for determination by the Tribunal is whether the Zoo’s provision of “animal encounters” falls within the scope of the exemption as argued by the Commissioners or is a taxable standard rated supply, as maintained by the Appellant.  It was common ground that the encounters are a single supply.  Participants are given, at the conclusion of the encounter, a certificate and some photographs but it was agreed that they are a means of better enjoying the experience and are subsumed as elements within the principal supply. 
5.	The Zoo benefits from the exemption for cultural services previously provided in Article 13(A)(1)(n) of the Sixth Directive, now provided in Article 132(1)(n) of the Consolidating Directive:
	“Article 132
1.	Member States shall exempt the following transactions:
(n)	the supply of certain cultural services, and the supply of goods closely linked thereto, by bodies governed by public law or by other cultural bodies recognised by the Member State concerned.”
6.	That exemption has been implemented in domestic legislation by means of section 31 of, and Group 13 of schedule 9 to, the Value Added Tax Act 1994 which provides at Item 2 for the exemption of:
	“2.	The supply by an eligible body of a right of admission to —
			(a)	a museum, gallery, art exhibition or zoo.”
The Evidence 
7.	The Zoo was founded in 1963 and is a registered charity.  It covers some 88 acres and attracts half a million visitors every year.  Visitors, on entry to the zoo, pay an admission fee which clearly falls within Item 2(a) and is exempt.  Entry fees, however, are not the only source of income to the Zoo.  Income is derived from catering and merchandising outlets and additionally from animal filming and photography, adoption schemes whereby members of the public adopt or sponsor individual animals and animal encounters.  In very brief terms an animal encounter offers a member of the public, who will already have paid his admission fee to the zoo, the opportunity to make an additional payment to experience a closer contact with certain animals.  It is the tax liability of that additional payment which is the issue in this appeal. 
8.	What is included in an animal encounter varies, and indeed the animals with which the encounter takes place also vary.  The encounter lasts some 10 minutes and takes place on Saturdays and Sundays only and only once a day.  They are so limited because anymore than that would distress the animals, who can only take so much interaction from people other than their keeper.  Currently, encounters are offered with giraffes and elephants.  Formerly, baby gibbons were also included but as they became bigger, they became a danger to the public.  Mrs Marshall said that the gibbons could be reinstated if any further babies were acquired and indeed the range of animals, she told us, is not closed and others could be added at some future time.  What is included in an encounter also varies.  It will change according to the age and type of animal available and also is sensitive to external factors, for example at the present time, all encounters are temporarily suspended for foot and mouth disease.  An encounter might also have to be cancelled if an animal is not well.  Encounters are advertised by way of fliers sent out with advertising literature and information packs. The flier included in the tribunal bundle offered the opportunity to bathe, groom and feed an elephant, prepare its food and clean out its enclosure.  It costs £75.  Partly for health reasons and partly so as not to cause further stress to the elephant, bathing and cleaning out the enclosures are not currently offered and the fee is reduced to £30.  All encounters take place in the constant presence of the keeper and in the case of elephants, two keepers.  The encounter is conducted by the keeper who will guide participants and tell him or her exactly what to do.  The keeper will tell the participants all about the animal and answer any questions.  The participant will sometimes prepare the food where that is appropriate but will always feed the animals.  In the case of giraffes and elephants, the encounter takes place not in the animal’s own enclosure, as that would be too dangerous, but in an enclosed area directly outside the enclosure.  This is an area where the general public is not allowed and it is accessed through a gate.  The area is separated from the animal’s enclosure by a railed fence and participants therefore reach over or through the fence and into direct and physical contact with the animal.  With other animals, encounters need not take place in an enclosure.  For example the baby gibbons were not caged and the encounter would take place in the open wherever the gibbons were roaming.  This would be in an area open to the general public.  Again, with gibbons, they were not fed but unlike the giraffes and elephants, a participant could hold and cuddle them.  They did not have to be physically separated. 
9.	Encounters have to be prebooked and a booking form has to be completed.  Not infrequently, an encounter is purchased for someone else.  On acceptance of a booking, the Zoo writes formally to the participant inviting them to come and feed the animal in question.  The participant in an encounter gains access to the Zoo in the same way as everybody else, by coming through the turnstile and paying the admission fee.  They are then free to look around the zoo in the normal way or to come direct at the appointed time for their encounter.  Participants will report to the reception area where they will be met and will be taken through a very extensive health and safety protocol.  This alerts them to all possible dangers and informs them what they can and cannot do.  They then have to sign a form of disclaimer accepting that the Zoo takes no responsibility for any incident that may occur.  A detailed risk assessment will have already been carried out by the Zoo and indeed a copy of this was before the tribunal.  The participant will then be escorted to the enclosure.  They are given an antiseptic handwash both before and after the encounter.  At the end of the encounter, they are debriefed, the keeper will answer any further questions, photographs are taken and presented to the participant, along with a certificate.  Mrs Marshall was asked why people would want to undertake an animal encounter.  She said that it was so that they could get closer to the animals; they wanted to learn rather more about them than they otherwise would.  It was something different from the ordinary experience of visiting the Zoo and she concluded that it was just “a nice thing to do”.  
10.	Mrs Marshall also took the tribunal, in response to questioning from Ms Sloane, through what is included within the normal admission fee to the Zoo and for which no additional charge has to be paid.  The Zoo offers a number of additional attractions including watching the sea lions and penguins being fed, watching animals being trained, touring the Tropical House and attending talks and demonstrations.  There is no additional charge for the tours of the Tropical House but entry is timed and is by way of token.  Within the Tropical House there is a conducted tour by a keeper who informs people as they go round what they were seeing.  Mrs Marshall agreed, in response to questions from Ms Sloane, that the Zoo’s  keepers are all trained to answer questions from the public and a member of the public wandering round the Zoo, is always allowed to stop and ask a keeper anything they want to know.  There would, of course, however not always be a keeper available.  
Submissions
11.	On behalf of the Commissioners, Ms Sloane’s principal submission was that the animal encounter is nothing more than a particular form of admission to the Zoo.  All visits to the Zoo involve viewing, encountering and learning about the animals.  There is nothing in the terms or purpose of the domestic or European legislation requiring “admission” to be interpreted so that it covers only the supply included in the standard admission fee and excluding all other forms of admission or viewing experience.  The Sixth Directive exempted “certain cultural services” and did not dictate that “admission” be restrictively confined solely to the admission supplied for the standard fee. 
12.	Highlighting the wide array of attractions on offer at the Zoo which were open to the general public on payment only of the admission fee, Ms Sloane pointed out that mere admission ordinarily encompasses considerably more than setting foot on the premises.  A visitor to the Zoo on payment of their admission fee is admitted to view, to learn, to listen to talks, to attend demonstrations and, if they wish, to take a conducted tour of the Tropical House.  It was therefore entirely sensible to interpret the right of admission as encompassing all the cultural services which the Zoo provided.  Admission to the Zoo should be interpreted as encompassing the supply by the Zoo of any of its cultural services.  It did not matter whether they were included in the ticket price or broken down into supplementary charges.  If they were, any such additional charge should also be exempt.  
13.	To limit the extent of the exemption to mere admission to the premises would be an excessively restrictive construction.  This extended approach suggested by the Commissioners would not conflict with the Directive which referred broadly to “certain cultural services”.  The Commissioners’ approach would not therefore be to expand upon the Sixth Directive, nor would it be contrary to its spirit and purpose.  The purpose of the exemption was to relieve customers of the VAT burden when receiving the cultural services provided by the Zoo.  It would therefore be contrary to the purpose of the legislation if the services provided by the Zoo to enhance the cultural experiences it offered were subject to separate charges which had to fall outside the scope of exemption.  
14.	Ms Sloane drew attention to services offered by other zoos, specifically a “Badger Watch” offered by Paignton Zoo.  This was an enhanced service but it would not be rational that it fell outside exemption.  A proper approach was to view all cultural services offered by the Zoo as being encompassed within “admission to the Zoo”.  
15.	In the alternative, if the tribunal considered that “admission” had to be interpreted more restrictively, Ms Sloane contended that if an extra charge was made for admission to a particular area, then that could be included also within the scope of the exemption.  Admission to the Zoo could be read as encompassing admission within the Zoo to particular areas or particular features.  
16.	For the Appellant, Ms Whipple pointed out that the Directive requires Member States to exempt the supply of “certain cultural services” but it is left to each individual Member State to determine the scope of their own domestic cultural exemption.  The UK has exempted the right of admission to … a Zoo and it is that wording which has to be construed strictly but not unduly restrictively.  The liability of animal encounters will depend upon whether what is supplied falls within the exempting provision of Item 2.  If not, it falls to be taxed at the standard rate.  Ms Whipple contended that when a member of the public purchased an animal encounter, he was buying an experience separate from and far beyond what was included in the general admission charge.  The legislation does not exempt all the cultural services by the Zoo but merely the right of admission to it.  This wording is perfectly plain and if what is supplied is beyond that right of admission, it falls to be taxed.  To include within the definition of “a right of admission” supplies above and beyond that right of admission, would be to widen the scope of the exemption to an unacceptable degree.   Not only was it a corruption of the wording but it would be a distortion of the legislation.  
17.	In response to Ms Sloane’s alternative submission, Ms Whipple argued that first the legislation did not say admission to a particular area would be exempted.  It refers specifically to admission to a zoo.  Secondly, in the matter of the animal encounters, a participant is not merely being admitted into a separate part of the zoo, they are being offered a whole range of benefits over and above admission to a particular area. 
Conclusions 
18.	It was agreed by both advocates that the proper approach to the interpretation of the exemption is set out by Advocate Jacobs in Case C-267/00 London Zoo at paragraph 19:
“I agree that exemptions from VAT should be strictly interpreted but should not be whittled away by interpretation.  The Commission is right in that regard to contrast the notions of strict and restrictive interpretation.  As a corollary, limitations on exemptions should not be interpreted narrowly, but nor should they be construed so as to go beyond their terms.  Both the exemptions and any limitations on them must be interpreted in such a way that the exemption applies to that to which it was intended to apply and no more.  Thus, I would agree with the Society that it is appropriate to consider the purpose of the relevant provisions in their context.” 
19.	It is clear therefore that I have to have proper regard to the wording of the domestic legislation.  I should not construe it too narrowly but neither should I expand upon its proper meaning to the extent that it encompasses more than it was intended to encompass. 
20.	The issue is therefore, in simple terms, does what the Appellant supplies as an animal encounter fall within the scope of the wording of “the right of admission to the zoo”.  
21.	What therefore is an animal encounter?  The encounter is provided for an additional fee to someone who has already paid his admission fee to the Zoo.  It is variously described in the Zoo’s flier as a “thrilling encounter” and a “unique opportunity”.  Mrs Marshall described it as “not part of the ordinary experience” and “a nice thing to do”.  The component parts of the encounter vary; the animals change and the venues change but the essence of the encounter remains the same.  A participant experiences at first hand a very close encounter with an animal.  He gets much closer than a member of the general public.  He personally meets the keeper who accompanies him throughout his visit and is told all about the animal.  He can ask questions which the keeper will answer.  He is instructed in how to feed the animal and is then allowed to do so.  He is photographed with the animal and is certificated at the conclusion.  The essence of the encounter, therefore, is a close and special contact which is beyond that experienced by the general public.  Both advocates stressed that it was not the physical contact which was the defining feature.  That I accept but there is in the encounter a degree of closeness and intimacy with the animals which the general public would not experience.  
22.	Having defined the nature of the animal encounter, the second question is how should the “right of admission” be construed.  I accept Ms Whipple’s contention that one looks to the plain and ordinary meaning of the wording.  Member States were given a wide mandate and the UK Government exempted the right of admission, nothing more and nothing less.  In my view, what is exempted is the physical admission to the Zoo.  The notion of admission cannot in its ordinary meaning be extended to encompass all the cultural services offered by the zoo.  
23.	Ms Sloane is correct when she points out that a member of the general paying public, within his admission fee, is admitted to view and learn about the animals and listen to talks but that cannot alter that what the Zoo is providing in its animal encounters is a discrete package of benefits which as a whole is beyond anything which the general paying public are able to experience and that package cannot be construed as a right of admission.  
24.	I also cannot accept Ms Sloane’s alternative contention that what is being supplied here is a right of admission to a designated area within the Zoo and as such, although a separate supply, would fall to be an exempt supply of a right of admission.  What the Zoo is supplying here is, as I have said, a package or a range of benefits.  The Zoo is not merely supplying the right of admission to a part of the Zoo to which the general public would not normally be allowed access.  Indeed, the venue of the encounter varies.  Further, if Ms Sloane’s argument was correct, it would mean that the location of the encounter became the defining element in its tax treatment which both advocates accepted would not be a sensible conclusion.  The encounter with the elephants and the giraffes would be exempt because the encounter took place within an enclosed area but the encounter with the gibbons would not because it took place in a public area.  
25.	In summary, therefore, I reject both of Ms Sloane’s contentions and hold that the supply of the animal encounters is a single taxable supply and falls outside the scope of the exemption.  In relation to the animal encounters I therefore allow the appeal.  Ms Whipple made an application for costs which was not resisted by Ms Sloane and I therefore direct that the Respondents should pay the Appellant its reasonable costs of this aspect of the appeal, such costs to be fixed by a chairman sitting alone if not capable of agreement. 

The costs on the Animal Adoptions
26.	The only information I have on the animal adoptions is that which I can glean from the correspondence between the parties contained in the bundle of documents.  By letter dated 6 March 2006 the Appellant sought a ruling on the tax liability of its animal adoption scheme.  By letter dated 20 June 2006, the Commissioners ruled that the supply was a mixed supply of exempt admissions, a zero-rated information sheet and the remainder standard rated.  By letter dated 17 July 2006, the Appellant sought a reconsideration, maintaining that the supply being made, for a set fee, was the right to participate in the upkeep of an animal.  As such, there was one single standard rated supply.  The Appellant maintained in its letter that the right of admission, far from being an aim in itself, was an aid to better enjoyment of the benefits of the sponsorship as it gave the sponsor the right to see the animal involved.  On review, the Commissioners maintained their stance, still maintaining that it would be artificial to see admission as ancillary to the other tangible benefits of the package.  By letter dated 27 September 2007, the Appellant supplied to the Commissioners a batch of their most recent questionnaires showing the reasons why customers adopted animals asserting that the batch showed that “people invariably paid for adoption as part of the care for the animals they have adopted”.  This virtually reiterated what the Appellant had argued from the beginning, namely that what was being paid for was the right to participate in the upkeep of or care of an animal.  By letter dated 9 October 2007, the Commissioners conceded that “in the specific circumstances of this appeal” there was in fact a single supply at a standard rate.  Their revised ruling was reached “having now had the opportunity to consider that further information”.  
27.	It is against this background that Ms Whipple made her application for the Appellant’s costs in relation to the adoptions.  Her application was simple in that the Commissioners had conceded that element of the appeal and the costs should follow.  Ms Sloane resisted the application for costs as the Commissioners only revised their view after the very late production of further evidence.  
28.	I did not get the opportunity to see the questionnaires but the gist of them would have been reasonably clear and I do not see how they can have so fundamentally altered the view which the Commissioners were taking.  I understand that the evidence was delivered late because it had only just been obtained as part of a summer survey.
29.	On the limited information before me, I see no reason why the Appellant should be denied its costs and I hold that costs should follow the event and that the Respondents should pay the Appellant its reasonable costs.  

LADY MITTING

MAN/06/0498

CHAIRMAN
Release Date: 7 November 2007