20758

Zero rating – Item 1, Group 16, Schedule 8 VAT Act – School uniform – whether designed as clothing for young children and not suitable for older persons 

LONDON TRIBUNAL CENTRE

	FORSTERS SCHOOL & LEISUREWEAR LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	Nicholas Aleksander (Chairman)
					Mrs R Young JP

Sitting in public in London on 16 June 2008

Mrs Williams, a director for the Appellant

Sarabjit Singh, of counsel, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

Introduction
1.	This is an appeal by Forsters School and Leisurewear Limited ("the Appellant") against an assessment dated 22 November 2006 and subsequently amended by a notice of amendment dated 12 June 2007. The amount in dispute is now £20,147.18 plus interest.
The Issue
2.	In short form the issue in this case is whether the clothing supplied is to be zero rated under Item 1 Group 16 Schedule 8 VATA ("Item 1"). Item 1 provides for the zero rating of:
"Articles designed as clothing or footwear for young children and not suitable for older persons".
3.	This resolves itself into two questions. These are:
(1)	Were the articles designed as clothing or footwear for young children? ("the Design Test"); and
(2)	Were the articles suitable for older persons? ("the Suitability Test"). 
4.	The onus of proof is on the Appellant to show that these two tests have been satisfied in relation to the garments which are the subject of this appeal.
Factual Background
5.	It was not disputed that the following was the case.
(1)	The Appellant carries on business as a clothing retailer.  It specialises in the sale of school uniforms.  It sells uniforms for primary, middle and secondary schools.  In addition it sells protective clothing for use on school farms.
(2)	It does so from three shops.  In addition the Appellant attends induction evenings at various schools where it sells school uniforms to the parents of children who will be joining the school in question.  In the case of induction evenings for secondary schools, the children would be 11 years old.
6.	Richard John Duchesne, manager of the Appellant’s Ashford branch and responsible for sales at induction evenings gave evidence on behalf of the Appellant. A joint bundle of documents was produced at the hearing.  
7.	We were told that the Appellant bought in stock from appropriate manufacturers.  In some cases the manufacturer would embroider the relevant school’s crest or logo onto the garment as part of the manufacturing process.  In other cases, the Appellant arranged for a specialist embroidery company to embroider the crests or logos onto the garments.  The embroidered garments were then held as stock.
8.	We were also shown by the Appellant (with the Respondents' agreement) a large size sweatshirt (size 36 to 38 chest) which formed part of the uniform for Tunstall Primary School in Kent. The school logo had been embroidered on to the sweatshirt by the manufacturer.  The Appellant had arranged with the manufacturer to adapt their standard size 36-38 sweatshirt by making it with a smaller collar size and with smaller cuffs.  This made the sweatshirt suitable for young children (say 10 years old) who were overweight.  In addition we were shown examples of school trousers which had been manufactured especially for the Appellant with an extra wide elasticated waistband so that it was suitable for overweight children.  We were told that similar adapted garments were manufactured for secondary school uniforms for overweight and obese pupils.
Public Notice 714
9.	Customs’ interpretation of the law is set out in their Public Notice 714.  Paragraph 4.2 of the Notice sets out tables of measurements.  Garments falling within these tables (which are based upon British Standards Institute sizing) are accepted by Customs as satisfying the Design Test.  The measurements are not set out anywhere in the legislation, but have been agreed with representatives of the garment industry that they represent a fair interpretation of the law.  All of the garments which are the subject of this appeal exceed the tabled measurements.
10.	In the case of garments which exceed the tabled measurements, Customs will still accept that they satisfy the Design Test if they are restricted by some other design feature to those aged under 14 years old (paragraph 4.2.1(b) of Public Notice 714).
11.	In addition to satisfying the Design Test, the garments must also satisfy the Suitability Test.  Customs interpret this in the Notice by stating that the retailer must ensure that the garments are held out for sale for young children (and by implication are unsuitable for older people).  This must be clear from labels, signs, packaging, advertising etc.
12.	Finally, paragraph 6.1 of the Notice states that items of school uniform remain subject to the normal rules for children’s clothing.  However, exceptionally, uniforms for schools catering exclusively for pupils aged 14 years or younger (for example primary and middle schools) can be zero rated.
The garments subject to the appeal
13.	The garments whose VAT status is in dispute can be divided into the following categories:
14.	Category A.  These are garments which form part of primary or middle school uniform but whose measurements fall outside the table at paragraph 4.2 of Notice 714.  These garments would fall within the exceptional provisions in paragraph 6.1 of the Notice and would therefore be zero rated.  The VAT Assessment was amended on 12 June 2007 to take account of the zero rating of these garments.  The VAT status of these garments is therefore no longer in dispute.
15.	Category B.  These are garments which form part of a secondary school uniform and whose measurements fall outside the table at paragraph 4.2 of Notice 714.  However these garments have been modified from the standard dimensions normally supplied by the manufacturer so that they have smaller collars and cuffs (for example) than the standard sizes.  These garments are intended for overweight and obese pupils aged 14 and under.  These garments might be sold at induction evenings at secondary schools or through the Appellant’s shops.  During the course of the hearing, Customs acknowledged that such garments might – depending upon their precise dimensions – satisfy the Design Test, even though their dimensions exceeded those in the table in the Notice.  Customs agreed to discuss these garments and their sizing with the Appellants to see if they could reach an agreement about their VAT status.  We return to this category of garments later in this Decision.
16.	Category C.  These are garments which form part of secondary school uniform and whose measurements fall outside the table at paragraph 4.2 of Notice 714.  Unlike the garments in Category B they have not been adapted by the manufacturer to fit obese and overweight children.  They are sold at induction evenings to parents of children who are about to start at secondary school.
17.	Mrs Williams submitted that the garments sold at induction evenings were sold to parents of children who were about to start secondary education and were therefore 11 years old.  Mr Singh, on behalf of Customs submitted that the garments within Category C did not meet the Design Test as they had not been designed for young children, as their measurements were outside the table and they had not been adapted in the manner of the Category B garments.  The fact that they were sold to be worn by an 11 year old did not make the sale zero-rateable.    
18.	We agree with Mr Singh.  We note that the factual circumstances relating to the sale of garments in Category C are very similar to the facts in Smart Alec Limited v CCE (2002) Tribunal Decision 17832, to which we were referred. Unlike the garments in Category B, the design of the garments in this category has not been specifically adapted for young overweight children.  These garments are standard sizes for children older than 14. For this reason they do not satisfy the Design Test.  The purchaser of the garment is irrelevant to the Design Test.  The fact that these garments may have been sold to the parent of a child under 14 who is overweight is not material.  Equally, the fact that a garment designed for a young child is purchased by a petite adult would not (subject to the Suitability Test) make the garment standard rated. 
19.	As the garments in Category C fail the Design Test, we do not need to consider the Suitability Test. 
Conclusion
20.	It has been agreed by Customs that the garments in Category A – that is garments which are part of the school uniform for primary and middle schools – are zero rated.  Customs have previously adjusted the VAT assessment to take account of this, and these garments are no longer subject to this appeal.
21.	We find that the Appellant has not shown that the garments within Category C fall within Item 1.  These are garments which are part of the uniform of a secondary school, whose measurements fall outside the table in Public Notice 714 and which have not been adapted by the manufacturer to fit overweight and obese children aged 14 years or less.  They, therefore, remain standard rated.  To that extent the appeal is dismissed.
22.	We make no finding in relation to the garments within Category B.  These are the garments which form part of a secondary school uniform, whose measurements are outside the table in Public Notice 714, but which have been adapted by the manufacturer to fit obese and overweight children aged 14 years or under.  Customs have agreed to discuss with the Appellant whether these garments might satisfy the Design Test on the basis of their technical specification.  In the event that agreement cannot be reached between Customs and the Appellant, we give leave to the parties to apply to this Tribunal for the matter to be determined.
23.	No application was made for costs and we make no award.

Nicholas Aleksander

CHAIRMAN
RELEASE DATE: 1 August 2008

LON/2007/1501