The First-tier Tribunal has dismissed an appeal that the construction of a lion enclosure and an outside exhibition called the “World of Dinosaurs” by Paradise Wildlife Park Limited (PWP) on behalf of The Zoological Society of Hertfordshire (ZSH) should be zero rated under VATA 1994, Sch. 8, Grp. 5, item 2(a), which provides for the zero rating of construction services supplied in the course of the construction of a building intended for use solely for a relevant charitable purpose (Paradise Wildlife Park Ltd v HMRC [2023] UKFTT 122 (TC)).
It was accepted that ZSH was a charity but to qualify for the zero rating it needed to establish that it was not going to use the buildings for any business purpose at all. The tribunal therefore considered the following issues:
- whether ZSH was carrying on a business;
- whether these buildings were used to some extent in that business; and
- a secondary issue, whether the “World of Dinosaurs” (an outside exhibition), was a building.
Was ZSH carrying on a business?
VATA 1994, s. 94 states that “the admission, for a consideration, of persons to any premises” is deemed to be the carrying on of a business. HMRC therefore argued that, in charging for admission to the park, ZSH was carrying on a business.
The tribunal noted that case law had drawn a distinction between a “fee” (a wholly notional payment with no economic link to the supply) and “consideration” (where there is some relationship between cost/value and charge) and so were not convinced by the argument that any payment for any admission to premises inevitably meant that there would be a deemed business. However, it did not feel it needed to investigate this further as it had already determined that ZSH was carrying on a business by applying a series of tests that it had deduced from case law noting that “it does not matter whether ZSH is looking to make a profit or has some wider social/charitable purpose. What matters is how the entity operates.” [Tests at para. 16, application at para. 41-46.]
Furthermore, this analysis also illustrated that the admission charge to the park was indeed “consideration” rather than a “fee” meaning that it was unnecessary to consider whether s. 94 would apply if the admission charge was only a fee.
Were the buildings used to some extent in that business?
The tribunal judged that:
“We consider that, in operating the Park as a commercial attraction to raise money to finance its charitable activities, ZSH is carrying on a business and its business encompasses the full spectrum of activities it carries out in order to do this … We readily accept that the lions’ enclosure provides an improved, modern (and most attractive by the sound of things) home for them, which must have a positive effect in relation to ZSH’s conservation work, and also that the World of Dinosaurs has an educational function, but both of these constructions also make the Park a more attractive place to visit and perform a role in that (business) side of ZSH’s activities … and so we determine that the lions’ enclosure and the World of Dinosaurs were not intended for use solely for non-business purposes.”
Was the World of Dinosaurs a building?
The World of Dinosaurs was a woodland walk taking visitors past animated models of dinosaurs. Although now academic the tribunal considered whether this could constitute “a building”. Applying Wheeled Sports 4 Hereford Ltd v HMRC, [2011] UKFTT 190 (TC) (a case concerning a skate park) the tribunal concluded:
“It has been built. It is a permanent structure. It can be used, but in no sense is it a building. There is no enclosure, no walls, no roof. No one looking at it would naturally describe it as a building.”
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08729.html
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