Harrison v Revenue & Customs [2011] UKFTT 345 (TC)

FTT-Tax

Harrison v Revenue & Customs

[2011] UKFTT 345 (TC) · 2011-05-23

[1]This is an appeal by Mr Edward George Harrison (“the Appellant”) against the decision of The Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) that the Appellant is liable to register for VAT purposes on the grounds that he is a sole proprietor making taxable supplies of shooting in the course of a business, and against consequential assessments to VAT made by the Commissioners on the Appellant in relation to such supplies, those assessments totalling £75,459. The Appellant also appeals against a penalty assessment made by the Commissioners in respect of the Appellant’s failure to notify the Commissioners that he was liable to be registered for VAT purposes.

[2]Licences to the shooting rights over two adjoining estates were respectively granted by the landowners of those estates in the names (initially) of the Appellant and another individual and in the case of one estate the shooting was enjoyed by a syndicate of individuals (all close friends of the Appellant) and including the Appellant himself, with the Appellant administering the affairs of the shoot and the syndicate; in the case of the second estate the shooting was enjoyed by a second syndicate of individuals (all known to the Appellant, but close friends of, and chosen by, the person who became the syndicate shoot captain, and not including the Appellant) with the Appellant again administering the affairs of the shoot and the syndicate.

[3]The Commissioners claim that the Appellant was, by these arrangements, making taxable supplies of shooting, and was doing so in the course of a business, and that since the value of the supplies made exceeded the VAT registration threshold, the Appellant was liable to register for VAT purposes, and was also liable for the VAT he should have accounted for had he duly registered, and for penalties for non-compliance.

[4]The Appellant argues that the arrangements between himself and the two syndicates did not give rise to any supplies; that if they did, the supplies in question were supplies only of administrative services whose value did not exceed the registration threshold; that even if the Appellant supplied shooting rights to the syndicates, the value of those supplies did not exceed the registration threshold; and that even if the Appellant supplied shooting rights and the value of those rights exceeded the registration threshold, the arrangements between the Appellant and the syndicate members were such that the Appellant did not supply those rights in the course of a business, but as the shared enjoyment of a private pleasure. The Appellant also argues that, at least for the initial years, since the shooting licence over the first estate was granted jointly to himself and another individual, the assessments for those years, in the name only of the Appellant, were wrongly made. The Commissioners’ decision and the assessments and penalty under appeal

[5]The Appellant appeals against the following (the appeals were consolidated by the tribunal’s direction):(1) A decision of the Commissioners dated 6 May 2008 determining that the Appellant was liable to be registered for VAT purposes pursuant to Schedule 1 to the Valued Added Tax Act 1994 (“VATA 1994”) with effect from 1 March 2003 as a sole proprietor on the grounds that he is a person making taxable supplies of shooting in the course or furtherance of a business. This decision was upheld on review by the Commissioners in their letter of 11 July 2008 to Grant Thornton UK LLP, who acted for the Appellant.

(2) A number of assessments, made on a “best judgment” basis, assessing the Appellant for VAT in the sum of £66,900 for the period 1 March 2003 to 31 August 2008; for £2,979 for the period 1 September 2008 to 30 November 2008; for £2,798 for the period 1 December 2008 to 28 February 2009; and for £2,782 for the period 1 March 2009 to 31 May 2009.

(3) A penalty for late notification of liability to be registered served on 7 May 2009 pursuant to s 67(1) VATA 1994 at a rate of 15 per cent of the Appellant’s net tax liability for the period 1 March 2003 to 5 May 2008 or £50, if greater.

[6]The Appellant appealed against the decision, the assessments and the penalty on the grounds that he is not making taxable supplies of shooting, and that if he is, he is not making such supplies in the course or furtherance of a business. The issues and our determination of the issues

[7]The principal issue for us is whether the Appellant is liable to be registered for VAT purposes, that is, whether he makes taxable supplies which are chargeable to VAT the value of which exceeds the registration threshold. There is also the issue of whether, if he should have been registered, the Appellant has a reasonable excuse for failing to notify the Commissioners of his liability to register so that he is not liable to the penalty for which he has been assessed. This issue broadly stated can be divided into the following questions:(1) What supplies, if any, did the Appellant make, and if he made supplies were they taxable supplies;

(2) If the Appellant made taxable supplies, were they made in the course or furtherance of any business carried on by him (and hence chargeable to VAT);

(3) If so, did the value of those taxable supplies made by the Appellant exceed the registration threshold at any time so that he thereby became liable to register for VAT purposes; and

(4) If so, is the Appellant nevertheless excused from liability to a penalty for late notification of liability to register.

[8]It is our decision that:(1) The only supplies which the Appellant made were supplies of services of administering and managing shoots operated by the syndicates to which he supplied those services. The Appellant did not make a supply comprising the grant of shooting rights or the provision of a shoot;

(2) The value of the supplies of services of administering and managing shoots did not exceed the registration threshold;

(3) Even if, contrary to our decision, the Appellant made a supply comprising the grant of shooting rights or the provision of a shoot, those supplies were not made in the course or furtherance of any business carried on by him and hence were not chargeable to VAT;

(4) In consequence the Appellant was not liable to be registered for VAT purposes, and his appeals against the decision of the Commissioners that he is liable to be registered and the assessments to VAT and the penalty assessment made in consequence of that decision are allowed; and

(5) If we are wrong, and the Appellant was liable to register for VAT purposes, the Appellant had a reasonable excuse for his failure to notify the Commissioners of his liability to be registered and therefore is not liable to a penalty for such failure. The legislation

[9]The source of the UK legislation relevant to this appeal is now the European Community Council Directive 2006/112/EC (“the VAT Directive”) which relates to the common system of VAT throughout the Community.

[10]Article 2 of the VAT Directive provides that “the supply of services for consideration within the territory of a Member State by a taxable person acting as such” shall be subject to VAT.

[11]Article 9(1) of the VAT Directive defines a “taxable person” as “any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity”. Article 9(1) then proceeds as follows (by way of guidance as to what comprises “economic activity”):

“Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as ‘economic activity’. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.”

[12]The UK legislation giving effect to these VAT Directive provisions are, so far as relevant to this appeal, found in sections 3 and 4 VATA 1994. Section 3(1) VATA 1994 provides that “a person is a taxable person for the purposes of this Act while he is, or is required to be, registered under this Act”. There follows a reference to Schedule 1 to VATA 1994, which concerns registration. Paragraph 1(1) of Schedule 1 to the VATA 1994 imposes a liability for a person making taxable supplies to be registered, in these terms:

“…a person who makes taxable supplies but who is not registered under this Act becomes liable to be registered under this Schedule – (a) at the end of any month, if the value of his taxable supplies in the period of one year then ending has exceeded [£55,000]; or (b) at any time, if there are reasonable grounds for believing that the value of his taxable supplies in the period of 30 days then beginning will exceed [£55,000].”

The “threshold” figure of £55,000 is that which applied in March 2003, the date on which the Commissioners contend the Appellant became liable to be registered for VAT purposes. Paragraph 5(1) of Schedule 1 to the VATA 1994 imposes the liability on a person to notify the Commissioners that he is liable to be registered:

“A person who becomes liable to be registered by virtue of paragraph 1(1)(a) above shall notify the Commissioners of the liability within 30 days of the end of the relevant month.”

The Commissioners had power to register a person who is liable to be registered even if that person fails to notify them of his liability.

[13]Section 4 VATA 1994 deals with the meaning of “taxable supply”:

“(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. (2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.”

[14]There is no definition of “business”: section 94(1) VATA 1994 provides that, for VAT purposes, “ ‘business’ includes any trade, profession or vocation”, and certain activities (not relevant to this appeal) are deemed to be the carrying on of a business.

[15]The parties agree that case law establishes that the concept of “business” in the UK legislation is congruent with the concept of “economic activity” in the VAT Directive: the point is material since an issue in the Appellant’s appeal is whether he is carrying on a business, and, as will appear, there is European case law which concerns the question of whether or not a particular activity is an “economic activity”.

[16]In this appeal the parties are not in dispute as to the meaning of the relevant provisions, but are in dispute as to whether the circumstances of the Appellant are such as to bring him within the scope of those provisions. The evidence

[17]In evidence before us we had an agreed bundle of documents in two lever arch files comprising letter and email correspondence between the parties; file notes of meetings between officers of the Commissioners and, respectively, the Appellant and a Mr Tilney (those notes were made by the officer attending the meeting in each case); letter and email correspondence between the Commissioners and a Mr Clifton-Brown; letter and email correspondence between the Commissioners and a Mr Batt and an officer’s notes of her meeting with Mr Batt; and a range of documents relating to the two shooting syndicates relevant to this appeal, including shooting licences, vehicle registration documents, employment contracts of gamekeepers, and annual accounts of each shooting syndicate for each year for which the Commissioners have made assessments.

[18]As to witness evidence, there were, by way of evidence adduced by the Appellant, witness statements of the Appellant, Mr Neville Tilney, and a number of the shooting syndicate members; in addition there was a report prepared by Mr Charles Loyd, an associate partner in the firm of Strutt & Parker, chartered surveyors. For the Commissioners there were two witness statements of Mrs Karen Randall, the officer of the Commissioners responsible for the decision made to register the Appellant and for the consequent assessments and a witness statement of Mr Colin Scott, also an officer of the Commissioners, who had accompanied Mrs Randall at certain of her meetings.

[19]The Appellant gave oral evidence at the hearing and was cross-examined by Mr Ruck Keene appearing on behalf of the Commissioners. The Appellant’s evidence dealt with the background to the decision to form the first syndicate in what became known as the Gresham Shoot; the grant by the estate owner of the shooting rights and the terms of those rights; the membership of the syndicate and the involvement and contributions of syndicate members; the expenses of the syndicate and the sharing of those expenses between the syndicate members; the employment of a gamekeeper; the bank account held for the syndicate; the accounts of the shoot and the way in which surpluses and deficits were dealt with at the end of each year; the circumstances which led to the formation of a second syndicate and its membership; the shooting rights licence granted for the benefit of the second syndicate; and the role of the Appellant and Mr Tilney in the operation of the two syndicates.

[20]Mr Tilney’s witness statement was not challenged by the Commissioners (Mr Tilney was in any event too ill to attend the hearing). His evidence also related to the circumstances leading up to the grant of the shooting rights over the estate and the formation of the first syndicate; his experience of running shoots; his role in the shoots over the estate and in the operation of the first syndicate; and the basis on which the syndicate operated.

[21]The witness statements of the various syndicate members were not challenged by the Commissioners. The witnesses were members of either the first syndicate or the second syndicate, and their evidence related to the formation of the syndicates; the membership of the syndicates (and the procedures followed if a member left the syndicate); the contributions by members to the running of the syndicates (in kind and in cash); the role of the Appellant in organising the syndicates and the finances of the syndicates; and the way in which members use the number of days’ shooting allocated to them. One of the witnesses, Mr George Barran, also gave evidence that he chose the members of the second syndicate and gave evidence as to how replacement members were chosen. Mr Christopher Harrison, the son of the Appellant, (and who is not a member of either shooting syndicate) gave evidence in his witness statement in his capacity as the contract-farmer of the East Beckham Estate. His evidence was not challenged by the Commissioners.

[22]Mr Loyd gave oral evidence at the hearing and was cross-examined by Mr Ruck Keene. Mr Loyd’s evidence is summarised below. Mrs Randall had produced a second witness statement in response to Mr Loyd’s report (dealing with such matters as the cost per bird of different shoots; the charge per gun or charge per bird made for a day’s shooting; and “guaranteed” or “expected” number of birds shot in a day’s shooting) and Mr Loyd commented on that evidence of Mrs Randall.

[23]For the Commissioners, Mrs Randall gave oral evidence at the hearing and was cross-examined by Mr Thomas appearing on behalf of the Appellant. Mrs Randall is a member of a specialist team established by the Commissioners to deal with the VAT treatment of shooting and other game activities, and in that capacity has taken part in the National Shooting Project operated by the Commissioners. Mrs Randall’s evidence related to the history of her investigation of the Appellant and the two shooting syndicates; her enquiries made of the Appellant, Mr Tilney and the landowners who granted the shooting rights; the conclusions she reached and the reasons for her decision that the Appellant was liable to be registered for VAT; the basis of the assessments subsequently made on the Appellant; and the grounds on which she considered that the Appellant was liable for the penalty for late notification of liability to be registered. As mentioned, Mrs Randall also gave evidence in response to that of Mr Loyd as to the operation and financial basis of shooting syndicates. The witness statement of Mr Scott was not challenged: Mr Scott’s evidence related to the meeting he and Mrs Randall had with Mr Tilney in the course of the investigation at which Mr Tilney described his involvement with the two shoots. Mr Loyd’s evidence

[24]Mr Loyd’s evidence covered various factual matters relating to the shoots enjoyed by the syndicates the subject of this appeal, and he compared the operation of those syndicates (which he characterised as “private” shoots) with the operation of a large shoot in Suffolk with which he is familiar, and which he characterised as a typical “commercial” shoot. He distinguished between such “commercial” and “private” shoots in the following way:(1) A commercial shoot will actively seek new members by advertising to the shooting “public” through websites and the specialised press, and will also seek purchasers for single days (“let days”);

(2) A commercial shoot is normally operated by the shoot owner, whereas a private syndicate will normally be operated by the agreement of the members according to their joint policy;

(3) In a commercial shoot any surpluses or deficits will be for the account of the owner, whereas in a private syndicate they will be for the account of the members;

(4) A commercial shoot will incur additional costs (advertising, agency and legal fees) as well as providing a more up-market product (with good quality food and drink, comfortable transport around the shoot, the option for overnight accommodation, etc) as compared with a private shoot, where the costs will relate solely to the quality of the shooting;

(5) A commercial shoot will charge the highest price for a day’s shooting that the market will stand: that will reflect not just the shoot’s costs per bird and the non-shooting facilities provided, but also such factors as the location of the shoot and the size of the expected “bag”. A private syndicate will share the costs of the shoot, and members’ contributions will be fixed accordingly;

(6) Members of a commercial shoot (including purchasers of let days) will expect to shoot a certain number of birds – a “guaranteed bag” – and will have a refund in certain circumstances if that is not delivered by the shoot. In a private syndicate there will be no such arrangement. The findings of fact

[25]From the evidence before us we find the facts as set out in paragraphs 26 and 27 below.

[26]As to the shooting rights and syndicate in respect of shooting on land forming the East Beckham Estate:(1) On 11 April 2002 Mr Geoffrey Clifton-Brown, the owner of the East Beckham Estate at Gresham in Norfolk granted the sporting rights on and over that estate to the Appellant and Mr Tilney (together as “Licensee”) for the period 2 February 2002 to 1 February 2005. The Licensee was responsible for preserving a proper and sufficient head of game on the estate, for controlling vermin and preventing poaching. The licence extended to the use of a cottage for occupation by a gamekeeper employed by the Licensee, the use of a shoot trailer and the use of shoot pens. The Licensee agreed not to assign or underlet the shooting rights, “save that the Licensee may himself arrange and manage a syndicate of guns”. The Licensee agreed to provide for Mr Clifton-Brown “in each season four days shooting for 10 guns with the opportunity of shooting 150 birds per day fully keepered and staffed at the expense of the Licensee”, together with the right for him to shoot informally with not more than 3 guns on either Boxing Day or New Years Day. The Commissioners valued those rights enjoyed by Mr Clifton-Brown at an annual amount varying from £15,289 to £19,915.

(2) When the grant of these sporting rights was renewed in 2005, since Mr Tilney had in February 2005 ceased to participate in shooting activities, the licence was granted to the Appellant alone.

(3) The Appellant farms in Norfolk in partnership with his wife and two sons, and the farming partnership is registered for VAT purposes. Throughout his adult life the Appellant has enjoyed shooting and other countryside pursuits and has a circle of longstanding farming and other friends who share those interests. In the past he has held a shoot over the partnership’s land, but that had ceased before 2002.

(4) Mr Clifton-Brown first offered the shooting rights over his land to the Appellant’s son, Mr Christopher Harrison (who farms the estate under contract), but as Mr Christopher Harrison did not wish to take up the offer the Appellant and Mr Tilney investigated the feasibility of running a shoot over the land and a syndicate was formed to enjoy the sporting rights which Mr Clifton-Brown was prepared to make available by licence. The licence of the shooting rights was, as mentioned, granted in the name of the Appellant and Mr Tilney jointly.

(5) Mr Tilney was very experienced in all the practical matters of running a successful shoot, having had a career as a keeper on large estates and of breeding birds for supplying to shoots. He had a high reputation in the area for such matters. The Appellant had known Mr Tilney for many years. Mr Tilney was also known to all those who became syndicate members, all of whom regarded his involvement as a strong inducement for them to join the syndicate.

(6) When the opportunity of taking the shooting rights arose and its feasibility had been investigated by the Appellant and Mr Tilney, they told shooting friends of the opportunity (and some friends, having heard of it, approached them), and a syndicate of ten members was formed. All the members of the syndicate (“Syndicate 1”, also known as “the Gresham Shoot” or “Gresham Shoot 1”) were longstanding friends of the Appellant and of each other. Some had been members of the shoot at the Appellant’s farm. In the Appellant’s view they had a common approach to shooting: enjoying the social camaraderie of the sport; enjoying the sport as a countryside pursuit in its widest sense (without undue focus on the size of the day’s “bag”); and wishing to participate in a well-run shoot confined to their friends and without the need for the trappings often found in shoots run on a commercial basis (lavish lunches and other refreshments, guaranteed “bags”, etc), and where costs were shared and kept to a minimum with members prepared to contribute their skills or time as and when circumstances required.

(7) The shooting rights in relation to Syndicate 1 extend over approximately 1,500 acres, including 29 acres of game cover. There are 16 drives and 5 release pens and the shoot offers 20 days’ shooting per year, with an average bag of about 200 birds per day over the season. 8 guns shoot per day. Partridge and pheasant are shot.

(8) Mr Christopher Harrison farms the estate under contract, and in the course of so doing provides cover crops for the game birds and generally co-operates with the shoot in the course of the management of the farm land, consistent with the terms of the licence of the shooting rights. In return, the syndicate allows him an occasional day’s shooting.

(9) Syndicate 1 was established on informal lines: there was no written syndicate agreement and no professional advice was sought in establishing the syndicate. It is not clear exactly when the syndicate came into existence, but the “Gresham Shoot” bank account (see below) was opened on 30 January 2002 and the first accounts of Syndicate 1 are expressed to be for the year to 31 January 2003. The arrangements between the syndicate members included the following: (a) There are ten members of Syndicate 1. The Appellant was a “half-gun” member of Syndicate 1, but initially Mr Tilney was not a member. Mr Tilney acted as shoot captain (organising the practical side of the day’s shoot), and when he was not a member he shot at the end of the line of guns (where birds were fewer); (b) The Appellant and Mr Tilney contributed some equipment and a small amount of cash to establish the shoot activity. When he retired from shooting, Mr Tilney received out of the then cash surplus of Syndicate 1 repayment of his cash contributed and an amount in respect of the equipment he had contributed; (c) The Appellant and Mr Tilney opened a bank account with Barclays Bank on 30 January 2002. The name of the account is “Gresham Shoot”, and the signatories at that time were the Appellant and Mr Tilney (either signatory could sign cheques or instruct the bank); (d) The Appellant purchased a second-hand vehicle and made it available to Syndicate 1 for transporting the guns around the shoot. The vehicle was initially fitted out, and then over the years serviced and repaired, without charge, by the Appellant and several other members of the syndicate, the syndicate purchasing any equipment or spare parts required; (e) Any new or replacement equipment required for the shoot (rearing huts, release pens etc) were purchased out of surplus funds in Syndicate 1’s account; (f) A gamekeeper was employed: his statement of terms of employment show his employer to be Gresham Shoot Syndicate 1, and in matters relating to the keeper’s holiday entitlement, sickness and grievance procedures the Appellant is named as the person to whom the keeper must apply or report. The gamekeeper’s wages and other employment costs are an expense met out of Syndicate 1’s funds; (g) A Land Rover was purchased by Syndicate 1 for the gamekeeper’s use and registered in the name of “Gresham Shoot Syndicate”; (h) Each year every syndicate member contributes a payment to Syndicate 1 in proportion to the number of gun places he wishes to use (for example, eight days’ shooting over the season, or four days’ shooting). For the forthcoming season the Appellant determines an annual charge to syndicate members after the end of the preceding season. The annual charge is based on the Appellant’s estimate of the costs of running the shoot for the forthcoming season, but also takes into account any surplus or deficit carried over from the season just ended. No profit element is included in the annual charge – the aim is to share the costs, and no more. Each member pays his annual charge in two equal instalments, in July before the season begins and in September, as it begins. The syndicate bank account has an overdraft facility, but the Appellant will contribute his share so as to reduce drawings on that facility, or by defraying an expense himself and delaying reimbursement, depending on the cashflow – the Appellant’s contribution in this way does not necessarily strictly equate to the half-gun contribution which otherwise would be payable by a member with his level of participation in the shoot; (i) Certain syndicate members have on occasion arranged to take all their days’ shooting for the season on one day or over two days (i.e. if he has eight days’ shooting for the season the member will take eight – or four – places on one day’s shoot, inviting friends or family to fill the places (often returning similar “hospitality” offered to him on another shoot)); (j) In arranging the shooting days at the beginning of each season Mr Clifton-Brown’s choice of his four reserved days has priority. During those days Mr Clifton-Brown and his guests will shoot birds reared by and at the cost of the syndicate and will have, at the syndicate’s cost, the attendance and services of the gamekeeper and beaters; (k) With the exception of the arrangements negotiated with Mr Clifton-Brown on the grant of the licence, and the occasional day’s shooting offered to Mr Christopher Harrison in return for his provision of ground cover in the farming of the estate, Syndicate 1 has never provided “let” days of shooting, that is, has never made available for a fee a day’s shooting for anyone outside the syndicate. If for any reason a member cannot shoot on a particular day he may try to “exchange” that day with another member not then due to shoot, or invite a friend to take his place without charge (if so, the expectation would be that the friend is known socially to at least some of the other members shooting that day and that he will fit in with the ethos of the syndicate). Otherwise his day is forfeit, and there is no refund of a portion of his members’ charge; (l) The syndicate is run with an emphasis on the sport: a mid-morning alcoholic drink is provided, but no other refreshments are provided (members supply their own), and facilities (such as transport around the shoot and a portakabin shelter for the lunch break) are rudimentary; (m) At the end of each day’s shooting the members of the syndicate take however many birds they wish, and the rest are sold to a game dealer and the sale proceeds brought into account towards defraying the expenses of the syndicate. The syndicate’s accounts for the year ended 31 January 2003 show income for bird sales of £2,067 (approximately 4.5 per cent of total income); for the year ended 31 January 2005, £1,107 (approximately 2 per cent of total income); (n) There have been few changes in the membership of Syndicate 1. If a member leaves the syndicate the continuing members decide whether they will take the extra days available or who may join the syndicate, to ensure the continuation of a syndicate of like-minded people with existing ties of friendship. When a member has left, no payment is made to him by the syndicate for the value of any assets held by the syndicate, and, correspondingly, no payment is required of an incoming member. There is no provision for what would happen to the shoot’s equipment and other assets if Syndicate 1 ceased; (o) Usually (but not every year) at the end of the season the syndicate members meet informally to discuss the running of the shoot, the possible purchase of any major items of equipment which it is thought the shoot requires, possible new syndicate members and other matters relevant to the syndicate. There is no chairman of such meetings, and no matters are minuted. Any action agreed upon is generally taken by the Appellant. If in the course of the season there are decisions to be taken outside the routine running of the shoot, the Appellant will sound out the views of syndicate members before taking action; (p) For each year the Appellant produces for Syndicate 1 simple accounts, showing income and expenses and a balance sheet (initially the accounts comprised only an income and expenses account – a balance sheet for each year was drawn up later). Income comprises the contributions made by syndicate members, and (for most years) income from bird sales; the principal expenses are the employee costs of the gamekeeper, the cost of young birds and rearing costs, and costs of feeding and medication for the birds. The balance sheets show the only assets as being debtors and cash (in surplus years) and liabilities as being creditors (including the bank in deficit years). Members’ contributions range from £37,750 in 2007 to £52,077 in 2005. Deficits were recorded in 2003 and 2004 and were carried forward, and in 2005 (the year of the highest contributions) there was a surplus which enabled Mr Tilney to be paid out for the value of the equipment he originally contributed and the balance eliminated the carried-forward deficit. In 2006 there was a deficit carried forward which was eliminated by the surplus in the following year, and in 2008 there was a small surplus. With the exception of the sums paid to Mr Tilney, no funds have been paid out to the members who have left the syndicate. No amounts have been paid out to the Appellant; (q) The Appellant manages the “business” side of the syndicate, acting as secretary/manager. The Appellant has no agreement with the syndicate to carry out these functions and makes no charge, but regards it as part of his personal contribution to the workings of the shoot. His tasks have in the past included: fixing and collecting members’ contributions; paying the costs and expenses incurred by the syndicate; paying the gamekeeper’s wages and ensuring compliance with PAYE and NIC requirements; dealing with the bank (originally as joint signatory, then as sole signatory); arranging liability insurance cover; maintaining records and preparing the annual accounts; dealing with any matters arising under the gamekeeper’s employment contract where the Appellant is the named contact; liaising with members to arrange shooting days; and arranging the members’ meeting in years when they are held; and (r) Syndicate 1 shares some facilities, equipment and costs with Syndicate 2 (see below), and the two syndicates have joint liability insurance cover. This is done under informal and pragmatic arrangements rather than on a strict cost-sharing basis.

[27]As to the shooting rights and syndicate in respect of shooting on land at West Beckham:(1) The exact way in which the shoot on land at the West Beckham Estate came about is unclear. It seems likely that various circumstances came together at about the same time. There was interest, by friends of those who were members of Syndicate 1, in joining the syndicate, but it was felt that the shoot would not withstand further shooting without taking shooting rights over additional land. It also became apparent that the shooting rights over land at the West Beckham Estate adjoining the East Beckham Estate might be available, but the members of Syndicate 1, whilst recognising the benefits of having shooting over that land, were unwilling to incur the extra costs of extending the shoot in that way, and they were reluctant to expand the syndicate at the risk of losing or diluting the particular social dimension which they regarded as a valuable part of their shoot.

(2) After discussion between the members of Syndicate 1 it was decided to approach the two landowners who held the land at West Beckham to see if they would grant shooting rights, and that if they were, whether a second syndicate could be formed to enjoy those rights. The members of Syndicate 1 recognised that their own shoot would benefit from having a like-minded, and similarly-managed (and similarly-keepered), shoot on adjoining land, not only in terms of opportunities to share equipment and costs and reap the benefits of economies of scale, but also to reduce the “loss” of game (more particularly, the “loss” from birds flying from the territory of their shoot would be broadly matched by the “gain” of birds flying in from the territory of the neighbouring shoot). Their own shoot would benefit in these ways without their having to bear the additional costs of expanding their own shoot or risk losing the social cohesion they enjoyed from their own particular syndicate.

(3) The Appellant, a longstanding friend of the principal owner of the neighbouring land, a Mr Robert Batt, was asked by the Syndicate 1 members to approach Mr Batt and a Mr Mermegan (who owned a smaller parcel of the neighbouring land) to negotiate shooting rights for a second syndicate. They agreed to this.

(4) A brief and undated document (signed only by the Appellant) is the only record of the shooting rights granted by Mr Batt. In relation to Mr Batt’s land, the Appellant is granted the rights to shoot over the estate in consideration of the payment of £1 per annum; Mr Batt retains the rights to shoot over the estate for two days each year. The Commissioners valued these rights enjoyed by Mr Batt at an annual amount varying from £7,644 to £9,304. There is no document in evidence as to the grant of rights over the land originally owned by Mr Mermegan (now owned by a Mr Wilson), but the evidence of the Appellant is that the syndicate pays an annual licence fee calculated at £5 per acre and £100 per acre for cover crop.

(5) Syndicate 2 was formed some time in 2003 to have the benefit of the shooting rights over the West Beckham land. The members were chosen by Mr George Barran, a member of Syndicate 1, from amongst his friends. Syndicate 2 has between ten and twelve members. Neither the Appellant nor Mr Tilney has at any time been a member of Syndicate 2. Changes in membership have been few, but replacement members are admitted only after consultation between the continuing members, and there is no payment either to departing members or by joining members. The ethos of Syndicate 2 is similar to that of Syndicate 1, with members who know each other well, enjoy each other’s company, and value a well-managed but low-cost shoot where the emphasis is on the sport.

(6) The shooting rights in relation to Syndicate 2 extend over approximately 900 acres, including 33 acres of game cover. There are 13 drives and 5 release pens and the shoot offers 14 days’ shooting per year, with an average bag of about 200 birds per day over the season. 8 guns shoot per day. Partridge and pheasant are shot.

(7) Syndicates 1 and 2 co-operate in the management and running of their respective shoots. Thus certain matters (including purchase of day-old birds, arranging liability insurance) are managed for both Syndicates together and the costs shared; the rearing field for birds destined for both Syndicates is situated on the East Beckham (Syndicate 1) land; the keepers employed respectively by the two Syndicates are expected to work co-operatively.

(8) Syndicate 2 operates in much the same way as Syndicate 1. Thus: (a) Syndicate 2 has its own bank account, with the Appellant as signatory (Mr Tilney was originally a joint signatory, as with Syndicate 1); (b) Members’ contributions are assessed and paid as in Syndicate 1; (c) Syndicate 2 prepares its own accounts. Syndicate 2 incurs and pays its own costs and expenses. If an expense is incurred on an item which benefits both Syndicate 1 and Syndicate 2, the expense will be shared between the two syndicates; (d) There is no profit element, but a sharing of costs between members of the syndicate, and deficits and surpluses are carried forward in the accounts from year to year (Syndicate 2 has been in deficit in only one year); (e) There are no “let” days, and a member who cannot use a day will “exchange” that day with another member or forfeit it; (f) A gamekeeper is employed by Syndicate 2, and the Appellant has the same functions with regard to his employment contract as with the employment contract of the gamekeeper employed by Syndicate 1; (g) In most years there is an informal meeting of syndicate members to review the past season and discuss any plans for the next season. This takes place in a pub, as a social gathering rather than as an organised meeting, and often with the members of Syndicate 1. As with Syndicate 1, in the course of the season the Appellant will informally seek the views of members if any major matters require a decision; (h) Although not a member of Syndicate 2, the Appellant carries out for Syndicate 2 the same tasks as he does for Syndicate 1. Again, there is no agreement for the Appellant to do this, and he receives no payment. The Appellant has never shot with Syndicate 2; and (i) During the period he was involved with Syndicate 1, Mr Tilney carried out similar tasks for Syndicate 2. He had no agreement and received no payment. The Appellant’s submissions

[28]Mr Thomas, for the Appellant, submitted that the Appellant was not liable to register for VAT purposes. He argued first that the Appellant had made no supplies for VAT purposes; secondly, that if the Appellant had made supplies, the value of those supplies in any year did not exceed the registration threshold; and thirdly, that if the Appellant had made supplies and the value of those supplies exceeded the registration threshold, those supplies were not chargeable to VAT as they were not supplies made in the course or furtherance of a business.

[29]As to his first submission (that the Appellant had made no supplies), Mr Thomas referred to the two decisions on shooting rights, the case of Customs & Excise Commissioners v Lord Fisher

[1981] STC 238

and the decision of the tribunal in the case of John Oswald Williams v Customs & Excise Commissioners VAT Decision 14240. Both those cases concerned landowners seeking to exploit their land by the grant of shooting rights over their land. That is not the Appellant’s situation: he is a person to whom the shooting rights are granted (either as agent for the two syndicates or as a principal – jointly with Mr Tilney in the case of the East Beckham Estate for the early years – who then makes them available to the two syndicates).

[30]The facts strongly indicate that the shooting rights were granted to the respective syndicates, with the Appellant, or the Appellant and Mr Tilney jointly, acting in an agency or fiduciary role in entering into the licence agreements with the landowners: in each case the syndicate was established before the licence was granted; bank accounts in the name of the respective syndicates were opened at or before the licences were granted; key initial arrangements such as the employment of the gamekeepers were made by the syndicates; syndicate members contributed practically to the arrangements necessary to equip the shoot.

[31]On that analysis the Appellant made no supplies whatsoever in relation to the shooting rights: at most he supplied each year to each syndicate the services of managing and administering the syndicates. The Appellant received no payment for such services. In the case of Syndicate 1 he was a member who paid his contributions (albeit on a different basis from the twice-yearly contributions of other members), and in the case of Syndicate 2 he was not a member and did not shoot with that syndicate. Even if there were an argument that his right to shoot as a member of Syndicate 1 was in some way the consideration for the services he supplied to that syndicate, the value of that consideration was substantially below the VAT registration threshold.

[32]If, to the contrary, the Appellant acted as principal in taking the licence of the shooting rights (jointly, for the first three years, with Mr Tilney in the case of the East Beckham rights) and then supplied those shooting rights to the two syndicates, the Appellant received no consideration for so doing since the syndicate members’ contributions were not payments to the Appellant, but were a sharing of the costs of the shoot, that is, the costs of the syndicate itself (the payment of the syndicate’s gamekeeper employee; the payment for day-old birds invoiced to the syndicate and paid out of the syndicate’s bank account, and so forth). There was no fee paid to the Appellant, and he had no entitlement to any surplus which arose in any year in the accounts of the syndicates. It is entirely wrong, so Mr Thomas argues, to characterise this as a case where a person, the Appellant, provides at his cost all that is necessary for a season’s shooting and then charges fees to those who contract for a specified number of days’ shooting.

[33]Assuming, against the Appellant, (and also disregarding the role of Mr Tilney) that the Appellant can be said to be providing the shooting rights per se to the respective syndicates, those rights, as valued by the Commissioners (in the context of their value to the respective landowners who granted them) do not exceed in any year an aggregate value of £28,000, which is substantially below the registration threshold. Therefore the Appellant’s second argument is that, even if he is regarded as making supplies of granting shooting rights, the value of those supplies is such that he is not liable to register for VAT purposes.

[34]As to the third submission, that any supplies made by the Appellant were not made in the course or furtherance of a business and therefore were not chargeable to VAT, Mr Thomas made extensive reference to the European case law on the meaning of “economic activity” as it appears in the VAT Directive, and the UK case law on the meaning of “in the course or furtherance of any business” in section 4(1) VATA 1994.

[35]In Mr Thomas’s submission, the European jurisprudence makes it clear that not everything which involves consideration is an economic activity, and the outcome (in terms of whether an activity generates profit) is irrelevant in determining whether an activity is an economic activity: it is necessary to look at the activity as a whole and then assess whether the activity is carried on with a predominant business or commercial objective with a view to obtaining income from that activity (in which case there is sufficient economic content for it to constitute an economic activity) or whether it is carried on with some other predominant purpose (in which case it is not an economic activity). He referred to the decisions of the Court of Justice in the cases of Floridienne SA and another v Belgian State (

Case C-142/99

)

[2000] STC 1044

and Banque Bruxelles Lambert SA v Belgian State (

Case C-8/03

)

[2004] STC 1643

[36]In his submission, the UK cases have been consistent with this approach in their consideration of the question of whether an activity is a supply made in the course of a business. Thus in Lord Fisher’s case (where it was conceded that there was a supply of services for a consideration, which is not the Appellant’s primary case) the court was concerned to distinguish between what was a business activity and what was an activity carried on for pleasure and social enjoyment (even if in some circumstances such activity could be carried on as a business). The court considered that the existence or otherwise of a profit motive is highly relevant to the making of this distinction, but not necessarily determinative: the issue is whether the way in which the activity is carried on shows a predominant purpose of carrying it on for a consideration or for some other purpose. This is also the basis of the decisions in Customs & Excise Commissioners v Yarburgh Children’s Trust (Ch)

[2002] STC 207

(a playgroup organised as a co-operative venture, charging fees to cover its costs, was not making supplies in the course of a business) and Customs & Excise Commissioners v St Paul’s Community Project Ltd (Ch)

[2005] STC 95

(a nursery project carried out as a social project and charging fees to cover a shortfall in grants and donations was not making supplies in the course of a business).

[37]Applying this to the Appellant’s circumstances, it is clear from the facts that the syndicates are run for the sporting pleasure and social enjoyment of the members, all of whom are close friends who participate in a shoot run with a particular ethos which they share and on the basis that costs are shared. The predominant concern is not to operate a shoot for a consideration, but to operate a shoot which provides good game shooting for a group of friends on a cost-sharing basis.

[38]Finally, Mr Thomas submitted that if it is held that the Appellant is making supplies which are chargeable to VAT, he should not be liable to the belated notification penalty imposed by the Commissioners on the grounds that he has a reasonable excuse for failing to notify the Commissioners of his liability to register. The issues in this appeal are complex and uncertain, as evidenced by three days of substantial argument before the tribunal, and the extensive case law cited by both parties. The Appellant has a reasonable excuse for failing to register in such a case, as recognised in the tribunal decision in the case of Standing Conference of Voluntary Organisations v Customs & Excise Commissioners VAT Decision 17827. The Commissioners’ submissions

[39]Mr Ruck Keene, for the Commissioners, argued that the Appellant is making supplies in the course of a business in that he is exploiting intangible property (the shooting rights acquired under licence) for the income to be derived from such property. This is an “economic activity” as defined in Article 9 of the VAT Directive. The issue in determining whether an activity is an economic activity (or a business) is whether assets are exploited on a continuing basis for a consideration, not whether there is a profit motive, as demonstrated in the Court of Justice decisions in cases such as European Commission v The Netherlands (

Case C-235/85

) and Enkler v Finanzamt Homburg (

Case C-230/94

)

[1996] STC 1316

[40]In deciding whether assets are exploited for a consideration it is necessary to look at the intrinsic nature of the activity, not the motive of the person carrying out the activity. In the UK cases this is expressed as whether the “predominant concern” of the activity is that it is carried on for a consideration: see Lord Fisher’s case, the St Paul’s Community Project Ltd case, Riverside Housing Association Ltd v Revenue and Customs Commissioners

[2006] EWHC 2383 (Ch)

and the tribunal decision in the case of Paola Sassi v Revenue and Customs Commissioners

[2009] UKFTT 280 (TC)

. The six indicia identified by Gibson J in the Lord Fisher case are useful tools in helping to identify whether an activity is a business, but of those indicia that of the “predominant concern” is likely to be the major issue for any tribunal required to determine this question.

[41]The Commissioners rely on the tribunal decision in the Williams case, which concerns the exploitation of shooting rights, and where the tribunal found on the facts that (unlike the case in Lord Fisher ) the landowner was running the shoot as a business and not as an activity of pleasure and social enjoyment: the taxpayer (a landowner) provided the shoot to members in return for a subscription (the shoot was also available to let on days on commercial terms); the members were not involved in calculating the amount of their contributions, and all aspects of the shoot were run by Mr Williams, with only one meeting of members over the course of several years. In Mr Ruck Keene’s submission the Appellant’s case was, on its facts, on the Williams side of the line rather than on the Lord Fisher side of the line. He accepted that in the present case there were no commercial let days, but argued that the days made available to Mr Clifton-Brown (Syndicate 1) and to Mr Batt (Syndicate 2) were equivalent (as with the commercial let days in Williams , they had priority over syndicate days), and were more than simply rights retained by those respective landowners when the shooting rights licences were granted. Conclusions The nature of the supplies made by the Appellant

[42]We consider first whether, on the facts of this case, the Appellant was making supplies by way of shooting rights (or, as Mr Ruck Keene developed his case in the course of the hearing, by way of exploitation of shooting rights conferred on him). Our decision is that he was not; that the only supplies he made were of services in managing and administering the two syndicates; that the value of those supplies was below the registration threshold; and that accordingly the Appellant was not liable to be registered for VAT purposes.

[43]The Appellant was not in the position of the taxpayer in either the Lord Fisher case or the Williams case – he was not a landowner granting shooting rights over his land. Instead, there are three possibilities – either:(1) the landowner granted the shooting rights to the Appellant (the Appellant and Mr Tilney jointly for the first three years in relation to the East Beckham Estate and possibly also the West Beckham Estate), and the Appellant (possibly with Mr Tilney) operated the shoots as his (or their) own venture and at his (or their) own cost, providing to the syndicates the right to shoot in consideration of the syndicate members paying an annual fee; or

(2) the landowner granted the shooting rights to the Appellant (and Mr Tilney, as mentioned), who in turn granted corresponding rights to, respectively, Syndicate 1 and Syndicate 2, and those syndicates operated the shoots (hired the gamekeeper, purchased and reared the birds, and so forth) at their own cost; or

(3) the landowner granted the shooting rights to the Appellant (and Mr Tilney, as mentioned) who held them in an agency or fiduciary capacity on behalf of the syndicates, and those syndicates then operated the shoots at their own cost.

[44]The Commissioners argue that the first of these possibilities most closely accords with the facts, and that the Appellant is in substance in the same position as the taxpayer in the Lord Fisher and Williams cases as to the nature of the supplies made – he was exploiting an asset (not the land, but the shooting rights granted to him). The Appellant argues that the facts support the third of these possibilities, so that the Appellant is making no supplies (other than those of administering the syndicates). The Appellant is, alternatively, prepared to accept that the circumstances accord with the second of these possibilities, on the basis that the annual value of the supplies made in such a case is below the registration threshold.

[45]We cannot agree with the Commissioners. For their case to hold good it is necessary that the Appellant (we deal below with the circumstances of Mr Tilney’s involvement) should be the person who, at his own expense and for his own account, operates the shoot, seeking to recover the costs of so doing from fees or contributions paid by syndicate members, and bearing any resulting loss or benefiting from any resulting profit from year to year. This is not the case. Although the informality of the arrangements gives rise to some uncertainties as to the exact nature of the relationships between the parties, the clear weight of evidence is that the shooting syndicates, and not the Appellant, operated the shoots.

[46]Thus it was the respective syndicates (and not the Appellant) who employed the gamekeepers (the fact that the Appellant was named as the reference person for administering certain of the terms of employment is not material). Invoices for major items of expenditure (such as those for day-old birds) were rendered to the syndicates (either individually, or together as “the Gresham Shoot”). The Land Rover used by one of the gamekeepers was registered in the name of the syndicate which employed him (the similar vehicle used by the other was registered in the gamekeeper’s name, but its insurance costs were paid for by Syndicate 2). Each syndicate had its own bank account into which were paid the contributions of the syndicate members and the proceeds from selling game, and from which all expenses of operating the shoot were paid. The accounts which were drawn up by each syndicate were accounts recording the income and expenditure of that syndicate. In years when there was a deficit in the income and expenditure accounts that deficit was borne by the syndicate members by being carried forward to the following year, where contributions were assessed at an increased level intended to eliminate the deficit in that year; correspondingly, in years of surplus such surplus was carried forward to the following year, and contributions for that following year were assessed at a reduced level so that the surplus was thereby returned to the members. The syndicate members usually met informally once a year to discuss the way the shoot was being run, and, given their close friendships with each other and with the Appellant, their views were made known informally over the course of the season. The practice of the syndicates was that members contributed their time and their skills to reduce costs or assist the smooth running of the shoots.

[47]Whilst it is the case that the Appellant ensured that all these things happened (and, in the initial years, Mr Tilney ensured that the practical side of the shoots was up to standard), that is a management and administration function which, as Mr Thomas put it, the syndicates would have had to hire at their expense if the Appellant had not been prepared to do it himself. It is not the case that the Appellant was himself engaged in running a shoot which he then provided to the syndicate members for a fee.

[48]The question then is whether the shooting rights were granted to the Appellant (and Mr Tilney) who in effect granted corresponding rights to each syndicate, or whether the Appellant (and Mr Tilney) were no more than the representatives of the respective syndicates, so that the shooting rights granted by the landowners are to be viewed as conferred on the syndicates themselves.

[49]Our conclusion is that the facts support the case that the syndicates received the shooting rights, and that the Appellant (and Mr Tilney) were the mechanism, so to speak, which brought this about, rather than principals receiving and then conferring corresponding rights. Although there is no clear evidence showing when either syndicate came into existence, it does seem clear that, once the Appellant knew from his son that Mr Clifton-Brown wished to grant shooting rights over his estate, he involved first Mr Tilney and then, once the feasibility of the shoot was established, brought together the Syndicate 1 members. The syndicate bank account was opened several weeks before the shooting rights licence was granted. It is the case that the licence refers only to the Appellant and Mr Tilney as licensee, but there is acknowledgement in the licence of the existence of the syndicate, in that the licensee is permitted to arrange and manage a syndicate of guns. Further, it was intended by Mr Clifton-Brown that his gamekeeper should be employed by those holding the shooting rights (and there is provision in the licence for sharing redundancy costs should the gamekeeper’s employment subsequently be terminated), and it was Syndicate 1 who employed the gamekeeper as from 1 February 2002, again, some time before the licence was granted. In correspondence between the Commissioners and Mr Clifton-Brown’s accountants in 2008 the accountants refer to the Appellant as the licensee (notwithstanding that the licence was granted to the Appellant and Mr Tilney jointly), but they also acknowledge that the gamekeeper was the employee of Syndicate 1.

[50]Furthermore, the terms on which Mr Clifton-Brown was entitled to his four days’ shooting suggest that the shooting rights were regarded as being held by Syndicate 1: the right he has is not simply to four days’ shooting for 10 guns, but four such days “with the opportunity of shooting 150 birds per day fully keepered and staffed at the expense of the Licensee”. There are also obligations placed on the Licensee to preserve a proper head of game, control vermin, prevent poaching and other matters pertinent to the proper running of a shoot. As mentioned, these matters were agreed in April 2002, more than two months after Syndicate 1 was established. Both the entitlement on those terms to four days’ shooting and such obligations can be conferred or fulfilled only by the entity operating the shoot, that is, Syndicate 1. Neither the Appellant alone, nor the Appellant together with Mr Tilney, were in any position to confer such an entitlement or fulfil such obligations.

[51]The position is similar in relation to the shooting rights over the West Beckham Estate. Again, the weight of the evidence is that the Appellant and Mr Tilney first put in place a syndicate (it was Mr Barran who actually selected the members, in order that there should be ties of friendship and a common approach between the members of that syndicate also) after assessing the feasibility of a shoot over the land and then agreed the licence terms. There is no suggestion that the Appellant would have taken the licence had the syndicate not been in place, engaged the services of a gamekeeper and so forth. The (undated) shooting licence runs to four lines only, conferring the shooting rights on the Appellant, and Mr Batt’s entitlement to two days’ shooting has no provision as to an expected bag. Again it is a reasonable inference that all parties knew that the Appellant was no more than the representative of the entity which would enjoy the shooting rights by operating the shoot and confer some significance and value to Mr Batt’s entitlement.

[52]We therefore conclude that the Appellant did not, other than in some agency or fiduciary capacity, receive the shooting rights, and could not have granted such rights to either Syndicate 1 or Syndicate 2. For VAT purposes there was no supply by the Appellant of shooting rights.

[53]The Appellant accepts that he has provided administration or management services to both syndicates, which is a supply of services for VAT purposes. He received no fee or similar remuneration for doing so. There is some question as to whether, in the case of Syndicate 1, of which he was a “half-gun” member, he contributed in cash the full amount of his contribution, and that if he did not, whether he received consideration to the extent and value he enjoyed the benefit of a reduced contribution. That question does not arise in relation to the services he supplied to Syndicate 2, of which he was not a member. But assuming the worst case against the Appellant (that he enjoyed the full value of his Syndicate 1 membership as consideration for the services he supplied) there can be no suggestion, and none has been made by the Commissioners, that the value of such consideration or of the supplies in their own right was such as to require the Appellant to be registered for VAT purposes.

[54]If we are wrong in finding that the Appellant did not receive the shooting rights as principal, the analysis is that he (jointly with Mr Tilney) was granted the shooting rights over both estates and granted corresponding shooting rights to, respectively, Syndicate 1 and Syndicate 2 (that is, the second of the three possibilities identified above). In that case (and leaving aside for the moment the complication of Mr Tilney’s involvement), the Appellant is supplying services in terms of the grant of such corresponding rights.

[55]This raises the question of the consideration for such a supply. It is not the contributions of the members – we have found that those contributions are the sharing of the costs incurred by the syndicates in running the shoots. Mr Thomas’s approach was to say that since the rights granted exactly correspond to the rights originally conferred under the licences by Mr Clifton-Brown and Mr Batt, then the supply must be regarded as made for a consideration having a value which corresponds to the consideration given for the original rights granted by those landowners. The Commissioners take the view that the landowners received consideration for the grants they made of the shooting rights in the form of the shooting days to which they were entitled (which were not simply reserved rights, but rights conferred on them enhanced in value by the activities of the syndicates in operating a well-run and well-stocked shoot). Mrs Randall was able to put a market value on that consideration by reference to the rate for let days in other comparable shoots. But as Mr Thomas pointed out, in the year when the aggregate value of the consideration enjoyed by the two landowners was at its highest (some £28,000 in the year to 31 January 2008), the figure was very substantially below the threshold at which the Appellant would have been required to be registered for VAT purposes, and this remained the case even if there were added the worst-case value attributed to the administration services supplied by the Appellant to the syndicates.

[56]This approach by Mr Thomas as to the value of the consideration received was not challenged by the Commissioners, and we agree with it. Therefore, even if the proper analysis of the facts is that the Appellant, as principal, made a supply of shooting rights to the syndicates corresponding to those rights granted to him, it remains the case that he is not liable to be registered for VAT purposes.

[57]These reasons are sufficient for us to allow the Appellant’s appeal.

[58]However, in case we are wrong and the Commissioners are right in arguing that the Appellant was himself operating the shoot (that is, the first of the three possibilities referred to above), there are two further matters we need to deal with. The first concerns the involvement of Mr Tilney, and the second is the question of whether or not the Appellant, even if supplying taxable services, is supplying those services in the course or furtherance of a business – if he is not, he is not required to charge VAT on such supplies nor, in consequence, is he liable to be registered for VAT purposes. Questions raised by the involvement of Mr Tilney

[59]As to Mr Tilney, the Commissioners found themselves in some difficulties at the hearing. It transpired that Mrs Randall, in the course of her investigations, was given only a copy of the later licence granted by Mr Clifton-Brown taking effect after the original licence expired in 2005, by which time Mr Tilney had retired, and the Appellant alone is shown as licensee. She was also wrongly informed by Mr Clifton-Brown’s accountants in 2008 that throughout the licensee was the Appellant alone. Mrs Randall made her decision that the Appellant should have registered and then made the consequential assessments on that understanding. The original licence of April 2002, with the Appellant and Mr Tilney as joint licensee, came to light in preparing the hearing bundles, but only in the course of the cross-examination of Mrs Randall did the significance of this become apparent to the Commissioners – Mr Ruck Keene’s skeleton argument, for example, asserted that the Appellant alone was the licensee. It is not clear whether Mrs Randall was aware that Mr Tilney was a signatory to the shoot bank accounts (but the point was noted in the Commissioners’ skeleton argument).

[60]Both parties took the view that, should it be necessary to have regard to the matter at all, the Appellant and Mr Tilney should not be regarded as being in partnership, but should be regarded as joint or co-owners of the shooting rights granted over the East Beckham Estate for the period from February 2002 until Mr Tilney’s retirement in February 2005.

[61]If that is the proper analysis of the arrangements we would be inclined to find on the facts that Mr Tilney was likewise, and for the like period, also co-owner of the shooting rights granted over the West Beckham Estate. He was not named as licensee in the agreement with Mr Batt, but too much reliance should not be placed on a four line undated document. What is clear is that Mr Tilney had the same involvement in relation to Syndicate 2 and the shooting rights enjoyed by that syndicate as he had in relation to Syndicate 1: he assessed the feasibility of the shoot; his involvement was a strong inducement to members to join the syndicate; he was joint signatory of Syndicate 2’s bank account; he fulfilled the same practical role of ensuring that the shoot was up to standard. It is the case that he was never a member of Syndicate 2 (but then neither was the Appellant, and Mr Tilney was not initially a member of Syndicate 1). Thus from the context it is reasonable to infer that Mr Tilney stood in relation to the rights granted by Mr Batt as he stood in relation to the rights granted by Mr Clifton-Brown.

[62]We are, however, reluctant to make findings on this question, both in relation to the West Beckham Estate shooting rights and the East Beckham Estate shooting rights. First, the parties did not offer us a considered view of this question at the hearing nor of the implications of any findings we might make on this point; and secondly, just as any such findings are likely to have implications for the Appellant, so they may have possible implications for Mr Tilney. We had the benefit of a witness statement of his evidence by Mr Tilney, but it did not deal with this question. Mr Tilney might well wish to make representations on a matter which could possibly result in a finding of fact which is detrimental to him.

[63]What we can conclude is that Mrs Randall’s decision which is the subject of this appeal is, in so far as it relates to the years 2002 to 2005, based on what most probably is a false premise, namely that the Appellant alone held the shooting rights throughout that period. No criticism attaches to Mrs Randall – it is clear from the documents that her investigation was persistent and thorough, and she reached her decision on the facts as they were disclosed to her. Some criticism can, however, be made of those preparing this case for the hearing, when this pertinent matter should have been identified so that a considered case could have been put before us, including the implications for both the Appellant and Mr Tilney and the effect, if any, on the decision and assessments under appeal.

[64]None of this is of significance unless our decision is reversed on appeal. Should that be the case we would respectfully suggest that the case is remitted back to us for the parties to make considered submissions and for us then to make findings on this question. Is the Appellant supplying taxable services in the course of a business?

[65]The second question we have to deal with if we are wrong in our primary decision is whether the Appellant (as a person exploiting shooting rights he holds by operating a shoot for syndicate members who pay contributions), is supplying taxable services in the course or furtherance of a business. Having regard to Mr Tilney’s involvement, the proper question in relation to years 2002 to 2005 may well be whether the Appellant and Mr Tilney are so supplying such services. Since the question can be answered without regard to that distinction, for the sake of simplicity we will deal with it by reference to the Appellant alone (that is, as though the Appellant alone had been granted the shooting rights throughout). Also, in our view, no distinction material to this question is to be made between Syndicate 1 and Syndicate 2. The question turns in large part upon the nature and conduct of the activities of the syndicates and the part the Appellant plays in those activities, and little difference in these respects can be discerned between the two syndicates.

[66]Counsel for both parties dealt at some length with the European case law on this issue – what constitutes “economic activity” for the purposes of the VAT Directive. Their submissions are summarised above. Although there were points of difference between Mr Thomas and Mr Ruck Keene, essentially they were in agreement that the issue, as it has emerged both in the European cases and the UK cases, is whether the predominant concern or purpose in carrying on the activity is that there should be some payment or other consideration given in return for the activity or whether the activity is carried on for some other purpose which is the predominant concern in carrying out that activity. In some cases this is expressed as the intrinsic nature of the activity as that is to be discerned from such predominant concern.

[67]Thus in Lord Fisher’s case the predominant concern in running the shoot was not that the taxpayer should receive the contributions which members of the shoot paid, but that the shoot should result in pleasure and social enjoyment. In the Yarburgh Children’s Trust case and the St Paul’s Community Project Ltd case, although fees were charged to the parents using the playgroup and nursery facilities provided by the charities, the predominant concern of the activity which was carried out was to provide the social and child care which was the objective of the charities concerned, and not to earn the fees which were charged for the purpose only of defraying the expenses of the facilities provided to the extent they were not met out of other sources of funding. Any services supplied were therefore not supplied in the course of a business carried on by the respective taxpayers in those cases.

[68]Applying this to the circumstances of the Appellant’s case, in our judgment the predominant concern of running the shoots over the East and West Beckham Estates was not to earn or receive the contributions of the syndicate members, but to provide the shoot as sport and social enjoyment on terms whereby the costs were met by member contributions. We consider that the following features of the shoots show this to be the case:(1) It was a matter of high significance in both shoots that all the members should be good friends and well-known to each other from other pursuits, like-minded and from a similar background. This was so not only in relation to the original members when the syndicates were first established, but was an important factor in bringing in new members when old members retired;

(2) Great care was taken, when a member was prevented from taking up a day’s shooting, either to exchange his place with another member, or to offer the day, at no cost, to someone outside the syndicate who was nevertheless known to the other members who would be shooting that day;

(3) The shoots had a particular ethos which all the members wished to preserve: essentially the shoot comprised local farmers and their friends who wanted quality and well-run shooting sport in its widest country pursuit sense without the trappings and costs associated with shoots aimed at a more wealthy clientele;

(4) A feature of that ethos was the readiness of members to contribute skills and time to provide or improve shoot facilities, and to help run a shoot day on days when they were not shooting – as one syndicate member put it in his witness statement: “everyone mucks in”;

(5) Contributions are made for the sole purpose of meeting the shoot expenses, and not to result in a profit. In any year deficits are borne rateably by members and surpluses are returned rateably to members through the mechanism of being carried forward and contribution adjustments made for the following year. No payment is made to members as they retire, and no joining fee is required of new members;

(6) Decisions affecting the shoot, other than routine matters, are reached on an informal consensus basis by all members;

(7) There is no advertising for new members;

(8) No days are let.

[69]In Lord Fisher’s case Gibson J pointed out that a shoot may be run as a business, notwithstanding the element of sport and social enjoyment:

“It is not difficult, for example, to imagine circumstances in which a man, controlling estates like those of the taxpayer, would so organise his shooting activity that it would rightly be regarded as a business. A longstanding love and pursuit of the sport, and genuine delight in the society of other people who shoot, and no doubt shoot well, could not by themselves prevent the activity from being a ‘business’ if in other respects it is. The running of the shoot for profit, the widening of the source of participants outside a genuine circle of friends and relations, the intensifying of the activity beyond what is normal for a private shoot and the use of advertising to obtain customers or participants are examples of matters which, as it seems to me, would be relevant for consideration on the question whether the shoot is run as a business. For my part I find it difficult to think of a case in which the pursuit of profit from contributions by participants would not be decisive to show that it was a business.”

[70]The operation of the two syndicates in the present case had none of these “business” characteristics or features. Mr Loyd’s evidence was helpful in this context in distinguishing what he described as “commercial” shoots from “private” shoots, but it is, of course, a question of law to be determined on the facts of a particular case as to whether or not an activity is a business for VAT purposes. That question is answered in the Appellant’s favour in the present case.

[71]Mr Ruck Keene invited us to follow the decision of the tribunal in the Williams case. There the tribunal concluded on the facts that the shoot fell on the “business” side of the line since it was much more than an activity of pleasure and social enjoyment. In that case the tribunal attached particular significance to the fact that the shoot was organised for commercial let days. The tribunal said this (at paragraph 45):

“For example, whereas in Lord Fisher there was one single occasion when due to inflation in a particular year the shooting was let to a firm connected with a relative and in very much a one-off departure from what was and had always been for very many years an entirely private shoot, in this case the whole operation has in the years with which we are concerned been planned and organised on the basis that there will be commercial lets around which the shoot for the members has to fit its dates.”

[72]That is a very material difference from the way in which the shoots in the present case were organised. Far from the “whole operation” being planned and organised to facilitate commercial lets, in the present case no part of the operation was conceived for or directed towards that end – in every respect the aim was to ensure good sport amongst a small and defined group distinguished by their long-standing friendships and their wish to enjoy good shooting together. Mr Ruck Keene argued that the days’ shooting enjoyed by the landowners should be regarded as the equivalent of commercial let days. But that is to misunderstand the nature and purpose of those arrangements. They were the consideration given by the syndicates for the grant of the shooting rights (equivalent to the licence fees paid to Mr Wilson in the case of the shooting rights he granted to Syndicate 2); they were not (unlike commercial lets) exploitation of the shooting rights for a fee.

[73]The game shot which the guns did not require themselves was sold after each day’s shooting to a game dealer, and the sale proceeds brought into account by each syndicate to help defray the costs of the shoot. The amounts received for game sold were hardly material to the finances of the shoots. We consider that to be a matter entirely incidental to the operation and purpose of the shoots, and not a factor which in itself renders the activities of the shoots a business for VAT purposes.

[74]We therefore conclude that any supply which may have been made by the Appellant (whether by himself or jointly with Mr Tilney) was not made in the course or furtherance of any business carried on by him, so that no VAT is chargeable on any such supply. The penalty

[75]The Appellant has been assessed to a penalty under section 67(1) VATA 1994 for failure to notify in due time the Commissioners of his liability to be registered for VAT purposes. The Appellant’s appeal against that penalty succeeds since we have held that he has not made any supply of goods or services which is chargeable to VAT. If we are wrong in our decision, and he has made chargeable supplies and therefore should have been registered we have to consider whether the penalty assessment should stand. Section 67(9) VATA 1994 provides:

“Conduct falling within subsection (1) above [i.e. failure to notify of a liability to be registered when liable to do so] shall not give rise to liability to a penalty under this section if the person concerned satisfies the Commissioners or, on appeal, a tribunal that there is a reasonable excuse for his conduct.”

Section 70 VATA 1994 specifies a number of matters which cannot be taken into account in considering whether any circumstance gives grounds for reasonable excuse for the conduct in question. The only one of such matters which could possibly be relevant in the present case is that the person liable to the penalty has acted in good faith.

[76]Mr Thomas said that the complexity of this case and of the question of law which it concerns provided a reasonable excuse for the Appellant’s failure to notify the Commissioners of his liability to be registered. He said that the UK cases cited by both parties showed that the Commissioners themselves and the courts also have found it difficult to draw the line in individual cases between what was a business activity for VAT purposes and what was not. He pointed out that it had taken a three-day hearing for the parties to argue these questions as they related to the Appellant’s circumstances. It was therefore entirely reasonable that the Appellant should find it a difficult matter and form a view that his circumstances were not such as to render him liable to become registered.

[77]Whilst a tribunal will rightly be cautious in accepting as a reasonable excuse the argument that a taxpayer was unaware of his responsibilities, we see the justice of the Appellant’s argument in this case, which we accept. This is clearly not an instance where a taxpayer has ignored the obvious circumstances which render him liable to become registered or where in some other way the taxpayer has been neglectful in a situation where his responsibilities are clear, or would be clear to him had he acted prudently and circumspectly and with knowledge of the principles of law applicable to his circumstances. Although the Appellant did not seek professional advice when he entered into these shooting arrangements, he did seek such advice as soon as the Commissioners began their investigation, and on the basis of that advice continued to assert that he was not liable to be registered. We note, too, the further complication of the role of Mr Tilney and the possible consequences and uncertainties which that posed for the Appellant in considering whether or not he was liable to be registered (questions which apparently defeated the Commissioners both before and during the hearing).

[78]Therefore, even if the Commissioners should eventually succeed in any appeal in their argument that the Appellant is making taxable supplies which are chargeable to VAT and that therefore he should have been registered as from March 2003, we conclude that there was a reasonable excuse for the conduct of the Appellant in failing to notify the Commissioners of his liability to be registered and that accordingly he is not liable to the penalty assessed.

[79]For the reasons given we allow the Appellant’s appeal against the Commissioners’ decision, the assessments and the penalty in this case. Costs

[80]The proceedings in this appeal were commenced in the VAT and Duties tribunal. The Appellant applied at the hearing that we should direct that, pursuant to the discretion we have under paragraph 7 of Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (“the Transfer Order”), Rule 29 of the Value Added Tax Tribunals Rules 1986 (Award and direction as to costs) (“Rule 29”) should apply to this appeal. Without such a direction the parties would be within the scope of The Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009, which has a different costs regime (which, in short, would not entitle the Appellant in this case to recover his costs). The Appellant made a further application, that, if we determined that Rule 29 should apply to this appeal, then we should award costs to the Appellant should he succeed in his appeal.

[81]We therefore have to decide, first, whether this is a case where it is appropriate to apply Rule 29, and, secondly, if it is, whether we should award the Appellant his costs (he having succeeded in his appeal), and if so, on what terms.

[82]We are within the scope of paragraph 7 of Schedule 3 to the Transfer Order since before 1 April 2009 (the date on which the Transfer Order came into force) the Appellant had served his notice of appeal on the VAT and Duties tribunal and thereby commenced his proceedings in that tribunal. (In this appeal there were several notices of appeal, each relating to the sequence of decisions and assessments made by the Commissioners as matters unfolded: the notice of appeal against the decision of the Commissioners that the Appellant was liable to be registered for VAT was dated 31 July 2008, and the consequent assessment made by the Commissioners on the Appellant was appealed against by a notice of appeal dated 28 November 2008. Further assessments and penalty assessments were made by the Commissioners, and in each case (but after 1 April 2009) the Appellant served a further notice of appeal. Mr Thomas, reasonably in our view, described these further assessments and related notices of appeal as “parasitic” upon the two principal matters in contention, namely the decision as to liability to be registered and the principal assessment made on the basis that the Appellant should have become registered. All the appeals were consolidated by the direction of the tribunal. These further assessments and penalty assessments do, however, raise an issue which we deal with below.)

[83]Paragraph 7(3) of Schedule 3 to the Transfer Order is in these terms, applying to tribunal proceedings commenced before 1 April 2009: The tribunal may give any direction to ensure that proceedings are dealt with fairly and justly and, in particular, may –(a) apply any provision in procedural rules which applied to the proceedings before the commencement date [1 April 2009]; or

(b) disapply any provision of Tribunal Procedure Rules. It is clear from paragraph 7(4) of Schedule 3 to the Transfer Order that “procedural rules” in sub-paragraph (3)(a) means, in relation to this appeal, the Value Added Tax Tribunals Rules 1986.

[84]Paragraph 7(7) of Schedule 3 to the Transfer Order provides: An order for costs may only be made if, and to the extent that, an order could have been made before the commencement date [1 April 2009] (on the assumption, in the case of costs actually incurred after that date, that they had been incurred before that date).

[85]Rule 29 gives a tribunal power to direct that a party shall pay to the other party to an appeal the costs of that other party which are the costs of and incidental to and consequent upon the appeal. The tribunal may either specify the amount which it determines as such costs, or direct that that such costs are taxed in the normal way on a basis specified by the tribunal.

[86]Therefore, applying these various provisions to the circumstances of this appeal, we have proceedings which began before 1 April 2009 and which are therefore within the ambit of paragraph 7 of Schedule 3 to the Transfer Order and at their commencement were subject to the Value Added Tax Tribunals Rules 1986 (including Rule 29); we have a discretion to give any direction to ensure that the proceedings are dealt with fairly and justly, including a direction to apply Rule 29; and any direction we may make as to the costs of the appeal must be within the ambit of Rule 29 on the assumption that all such costs had been incurred whilst the Value Added Tax Tribunals Rules 1986 were actually in force.

[87]Mr Thomas argued that we should exercise the discretion which we have, and apply Rule 29, and having done so, should direct the Commissioners to pay the Appellant’s costs of his appeal. He pointed out that the tribunal’s discretion is to be exercised in a manner which ensures that proceedings are dealt with fairly and justly, and that in the present case it is fair and just that the Appellant’s costs should be dealt with under the rules which applied when he began his appeal, at which time the new rules were not yet published nor their likely terms publicly known. He mentioned that there had been delays in the appeal proceedings on the part of the Commissioners, who first had raised objections to the tribunal entertaining the appeal without the payment of the tax assessed and then had asked for extensions of time to prepare their statement of case (which was not served until 3 April 2009): without such delays it was possible that the hearing of the appeal could have taken place before April 2009, or shortly into the new regime. This is not a case of an appellant who, knowing of the new costs regime, had hurried to bring his appeal before 1 April 2009, but a case where an appellant, when filing his notice of appeal, had a legitimate expectation that the then current rules as to costs would apply in the event that his appeal succeeded.

[88]Mr Ruck Keene argued that we should not exercise our discretion to apply Rule 29. He accepted that on two occasions the Commissioners had applied for an extension of time and had opposed the Appellant’s hardship application, but there had been no improper motive in so doing on the part of the Commissioners, and no intention of delaying the hearing until the new regime was in place. He said it was not realistic to surmise that the appeal could have been heard before 1 April 2009 without such action on the Commissioners’ part, since that was only seven months after the first notice of appeal. He said that there had been agreed joint directions on 16 March 2009 and also a pre-trial directions hearing attended by the parties on 3 July 2009: either of those provided a proper occasion on which the Appellant should have raised this matter, but the Appellant had failed to do so.

[89]We have decided that we should exercise our discretion, and we direct that Rule 29 apply to these proceedings. Whilst we share Mr Ruck Keene’s scepticism as to whether the hearing of this appeal would have taken place before 1 April 2009 absent the delays resulting from the Commissioners’ actions, we accept that the Appellant began his proceedings with the perfectly reasonable expectation that they would be governed by the costs rules then in place. We also consider that if there had not been delays occasioned by the Commissioners so that the hearing had been held in the early months of the new regime, both parties and the tribunal itself would, in all likelihood, to judge from previous practice, have expected Rule 29 to apply as a matter of course. Whilst we consider that as a matter of practice it would have been preferable for this question to have been raised in case management proceedings (so that the parties would know where they stood on this issue in continuing with the appeal), the fact that it was not so raised is not in any way fatal to the Appellant’s application on the matter made at the conclusion of the hearing. In all the circumstances these proceedings are dealt with fairly and justly if Rule 29, rather than the new costs regime, is applied.

[90]As mentioned, certain of the notices of appeal strictly before us were lodged after 1 April 2009 in response to subsequent assessments and penalty assessments made by the Commissioners. They may be regarded as assessments of a “procedural” (rather than a “substantive”) nature. We accept the point made by Mr Thomas that such assessments and notices of appeal are essentially “parasitic” upon the principal matters in this appeal which were the subject of decisions and consequent assessments (and, in turn, consequent notices of appeal) all made or served before 1 April 2009.

[91]Nevertheless, a question arises as to whether we have power under paragraph 7 of Schedule 3 to the Transfer Order to apply Rule 29 to that part of the proceedings which might be said to be attributable to those later assessments and notices of appeal. Paragraph 7 applies to “current proceedings that are continued [i.e. on or after 1 April 2009] before the tribunal”, and “current proceedings” are defined in paragraph 1(2) of Schedule 3 to the Transfer Order as proceedings where, before 1 April 2009, any party has served notice on an existing tribunal for the purpose of beginning proceedings before the existing tribunal and the existing tribunal has not concluded those proceedings (the “existing tribunal” for present purposes being the VAT and Duties tribunal).

[92]In a case such as this, where the substantive matters in the proceedings are “current proceedings” as defined, and where subsequent matters which are brought within those proceedings are entirely consequential upon or derived from those substantive matters, it is correct to regard all the proceedings, even those which (assuming they can be separated out) relate only to the consequential or derivative matters, as “current proceedings”, since the notice to begin those proceedings was served before 1 April 2009 and the subsequent matters and any proceedings attributable to them would have no basis or existence apart from the substantive matters and the proceedings commenced in relation to them. The fact that the tribunal directed that the various appeals should be consolidated supports this conclusion. The case may well be different where, say, an assessment is made on an alternative basis (and notice of appeal served) on or after 1 April 2009 and those proceedings are joined with other proceedings commenced before that date, but that is not the present case. Rule 29 should therefore apply to all the matters before us.

[93]In applying Rule 29, since the Appellant succeeded in his appeal without reservation, we see no reason (and the Commissioners offered no reason) to do other than order that the Commissioners pay the Appellant’s costs of this appeal, such costs (being the costs of and incidental to and consequent upon the appeal) to be determined in default of agreement by a Taxing Master on the standard basis, and we so direct. Either party has leave to apply to the tribunal for further directions should that be required to give detailed effect to our costs order. Right to appeal

[94]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. EDWARD SADLER TRIBUNAL JUDGE RELEASE DATE: 23 May 2011 Authorities referred to in skeletons and not referred to in the decision: Wellcome Trust Ltd v Customs & Excise Commissioners (

Case C-155/94

)

[1996] STC 945

Empresa de Desenvolvimento Mineiro GSPS (EDM) v Fazenda Pública (Ministério Público, intervening) (

Case C-77/01

)

[2005] STC 65

Customs & Excise Commissioners v Apple and Pear Development Council (HL)

[1986] STC 192

Institute of Chartered Accountants in England and Wales v Customs & Excise Commissioners (HL)

[1999] STC 398

National Water Council v Customs & Excise Commissioners (QBD)

[1979] STC 157

Institute of Chartered Accountants in England and Wales v Customs & Excise Commissioners (QBD)

[1996] STC 799

Customs & Excise Commissioners v Morrison’s Academy Boarding Houses Association (Inner House of Court of Session)

[1978] STC 1

Notts Fire Service Messing Club v Customs & Excise Commissioners (VAT Tribunal) VAT Decision 348 Van Tiem v Staatssecretaros vam Financiën (

Case C-186/89

)

[1993] STC 91

Riverside Housing Association Ltd v Revenue and Customs Commissioners

[2006] EWHC 2383 (Ch)

Quarriers v Customs & Excise Commissioners (VAT Tribunal) VAT Decision 20660