“Situated in the heart of Chelsea, one of the most fashionable and cultural areas of London, bordered by the elegant shopping and gastronomic facilities of the Kings Road, South Kensington and Knightsbridge. Chelsea Cloisters invites you to visit our prestigious building, only minutes away from the London Underground and within easy reach of the city, the West End and international connections from Waterloo, Heathrow and Gatwick. Our International Management team are devoted to ensure your enjoyment of our hospitality in one of our luxury designed Apartments. Fine quality en-suite bathroom and fully fitted separate kitchen incorporating modern appliances are standard features in every apartment and full central heating with constant hot water add to your comfort.”
“The grant of any interest in or right over land or of any licence to occupy land, or, in relation to land in Scotland, any personal right to call for or be granted any such interest or right, other than— … (d) the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering;”
“1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse: … (b) the leasing or letting of immovable property excluding: 1. the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;”
“1. Member States shall exempt the following transactions: … (l) the leasing or letting of immovable property 2. The following shall be excluded from the exemption provided for in point (l) of paragraph 1: a) the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;”
“21 In defining the classes of provision of accommodation which are to be taxed by derogation from the exemption for the leasing or letting of immovable property, in accordance with Article 13B(b)(1) of the Sixth Directive, the Member States enjoy a margin of discretion. That discretion is circumscribed by the purpose of the derogation, which, in regard to making dwelling accommodation available, is that the — taxable — provision of accommodation in the hotel sector or in sectors with a similar function must be distinguished from the exempted transactions of leasing and letting of immovable property. 22 It is consequently a matter for the Member States, when transposing Article 13B(b)(1) of the Sixth Directive, to introduce those criteria which seem to them appropriate in order to draw that distinction. 23 Where accommodation in the hotel sector (as a taxable transaction) is distinguished from the letting of dwelling accommodation (as an exempted transaction) on the basis of its duration, that constitutes an appropriate criterion of distinction, since one of the ways in which hotel accommodation specifically differs from the letting of dwelling accommodation is the duration of the stay. In general, a stay in a hotel tends to be rather short and that in a rented flat fairly long.”
“16. However, while generally exempting the leasing or letting of immovable property, Article 13B(b) also provides for exclusion of certain transactions from exemption. The common feature of those transactions is that they entail more active exploitation of the immovable property justifying further taxation in addition to that levied upon its initial sale. 17. With more particular reference to Article 13B(b)(1), it may be noted, first, that its terms, in particular the phrases `accommodation, as defined in the laws of the Member States' and `sectors with a similar function', are somewhat imprecise. It seems to me that the intention was to leave the Member States some latitude in defining the precise limits of the exclusion. 18. Secondly, as already noted, Article 13B(b)(1) lays down an exclusion from the exemption and therefore does not fall to be construed strictly. Indeed it seems to me that the words `sectors with a similar function' should be given a broad construction since their purpose is to ensure that the provision of temporary accommodation similar to, and hence in potential competition with, that provided in the hotel sector is subject to tax. 19. As regards the German provision, it is true that the short-term letting of residential property may not entail all of the additional supplies of goods and services, such as provision of meals and drinks, cleaning of rooms, provision of bed linen etc., normally provided in hotels. Nevertheless, there can be no doubt that a taxable person offering, for example, short-term holiday lets of residential property fulfils essentially the same function as - and is in a competitive relationship with - a taxable person in the hotel sector. The essential distinction between such lettings and exempt lettings of residential property is the temporary nature of the accommodation. In any event, short-term lets are more likely to involve additional services such as provision of linen and cleaning of common parts of buildings or even of the accommodation itself (indeed a number of such services are provided by Mrs Blasi); moreover, they involve more active exploitation of the property than long-term lets in so far as greater supervision and management is required. … 21. Moreover, it seems to me that the requirement flowing from the case-law of the Bundesfinanzhof that, in order for the letting of an immovable property to qualify for exemption, there must be an intention, evidenced by a lease or other agreement, to let the property for a minimum period of six months is not unreasonable. It provides a workable and legally certain means of distinguishing between short-term accommodation similar to that provided in the hotel sector and the longer-term letting of residential property for which the Directive provides exemption. A hotel or hostel will be willing to accept guests for potentially short stays, whereas a landlord interested in more passive longer-term lets will require an agreement providing confirmation of the tenant's intention to stay for a longer period. I see no reason to interpret the Directive as imposing a maximum of three months as the Commission suggests.”
“We can see the force of these observations. The students in that case were normally there for a course which would last several years of which at least one was spent in the accommodation in question. The student in this case is present in the United Kingdom (and usually at the accommodation as well) for, on average, only 15 weeks. It is difficult to say exactly when a person ceases to be a visitor on the basis that his stay has that degree of permanence referred to in ISH but we have concluded that whenever that time occurs it does not occur during the average stay of the student in this case. In finding this we have taken into account that the students in the present case are in the United Kingdom for a purpose. That expressed purpose is not to make a general visit to the United Kingdom (although the student may well take the opportunity to visit different places while he is here) but to pursue a course of study which happens to take place here. Even so, this does not in our view prevent him from being a visitor. Many visitors have a purpose in mind when they come to a place even when they intend to be in that place only for a short period. As the premises are clearly both used and held out as suitable for use by students and we have concluded that they will be visitors so that the expanded definition contained in note (9) applies.”
“In the end, I have concluded both that the grant of a Fractional Interest involved more than a mere letting transaction and that the obligations which FPSL undertook as regards the provision of hotel-type services cannot be regarded as ancillary or (in the words of the CJEU in Temco) ‘plainly accessory’. The ‘essential object’ of the transactions was not, as I see it, ‘the making available, in a passive manner, of premises or parts of buildings in exchange for a payment linked to the passage of time’, but ‘the provision of a service capable of being categorised in a different way’ (to quote the CJEU in Temco once again). This was not ‘simply the making available of property’ (Temco, para 20 of the judgment), but pre-payment for accommodation ‘in an environment similar to a hotel and with the services which can be expected in a hotel, repeatedly over a number of years’ (para [289] of the FTT decision). As in the Luc Varenne case, what was being supplied was ‘a more complicated service’. It is also not without relevance that the land exemption has to be construed strictly (see para [23](ii) above).”
“In my view, it was open to the FTT to consider that the grant of a Fractional Interest, carrying with it rights to ‘sleeping accommodation’ in an establishment similar to a hotel, is appropriately characterised as ‘the provision in an hotel … or similar establishment of sleeping accommodation’ within the meaning of Item 1(d). … Issue 3 only arises at all if the supplies at issue are taken to have had as their ‘essential object’ the making available of premises ‘in a passive manner’: the supplies would not otherwise be capable of falling within the land exemption and the Item 1(d) exclusion would be immaterial. If, however, FPSL’s role was sufficiently passive for the land exemption to be in point, it is hard to see how, leaving aside the Upper Tribunal’s concern that the supply was ‘of a long-term right’ (which I have already commented on), ‘sleeping accommodation’ could be considered to have been provided as part of a wider supply in such a way as to render the exclusion inapplicable.”
“The critical distinction is to be drawn between long-term lettings of residential accommodation (an exempt supply) and short-term lettings of accommodation as in the hotel sector (excluded from exemption). The rationale behind the exclusion is the economic reality associated with the provision of short-term accommodation, which invariably involves additional services, and greater supervision and management being provided for the purpose of providing the short-term accommodation.”
“In reality, the length of stay of a resident varies from one week to two years, with about 30% of lets being less than 6 months. The fact that no assured tenancy can arise from the contractual arrangement, however long the overall duration of stay, allows [YMCA] to exercise its right to evict a resident with 24 hours’ notice. While the majority of lets (70%) last for longer than 6 months, that does not change the short-term nature of the accommodation provision, given that there are multiple factors that enable [YMCA] and a resident to terminate the Agreement at short notice.”
“Against that background, the restriction on overnight guests leads us to conclude that an occupier does not enjoy rights to use a studio as an owner. Someone who is living in a studio for those periods of time would expect, if occupying as owner, to be able to invite any guest to stay overnight. In contrast, a short stay guest at a hotel would not necessarily expect to be able to invite any guest to stay overnight without restriction.”
“It is not always helpful to try and define terms which might be described as ordinary words of English. It is more helpful in the present context to identify the general characteristics of visitors and travellers. It seems to us that a visitor in the context of Note (10) is generally someone who is visiting an area for a particular reason and whose stay at the premises does not have sufficient degree of permanence to mark that person out as a resident. There are many reasons why someone might be a visitor, including work, study, leisure, or family reasons. On any view, it would not include someone who treats the premises as their home for the time being. It may be difficult in any particular case to draw a line between a visitor and someone whose intended stay has such a degree of permanence that they are not a visitor. The purpose for which an individual is staying may say something about the degree of permanence of the stay. It appears to us that the distinction is between a visitor and a resident, taking into account that an individual may intend to be resident for a relatively short period of time. A further point that arises is whether a visitor must intend to return home after the visit. Someone may be visiting having given up their home. They may be in search of a new home. In most cases, visitors will intend to return home or to establish a new home elsewhere following their visit. If not immediately, that same person might be regarded as a traveller and it may be that to some extent there is an overlap between those two types of occupiers.”
“186. There is grey area between what might be described as the hotel sector and the residential property sector. Serviced residential Apartments fall within that grey area. It seems to us that such premises may bear more similarities with either the hotel sector or the residential property sector depending on the particular facts. 187. It is difficult to say which side of the line The Quarters falls. It is a very marginal case. On balance, taking into account all the evidence, we are satisfied that The Quarters is likely to be used by some visitors and is held out for use by visitors. Whilst there is little evidence of who uses The Quarters, we infer from the way it is marketed and the nature of the rooms and facilities on offer that some visitors to London will use The Quarters as a base for their visit, as well as people who would be regarded as resident at The Quarters. We are also satisfied that The Quarters is held out for use by visitors, as well as residents. The evidence of holding out is essentially the marketing material, including the appellant’s website and social media presence. Considering that evidence in the context of our findings of fact as a whole, we are satisfied that The Quarters is held out as being suitable for visitors.”
“71. The exclusions from the article 13B(b) exemption show a clear and unequivocal intention on the part of the Council that transactions falling within an excluded category should fall outside the VAT exemption. But the exclusions cannot reasonably be supposed to indicate the opinion of the Council that every transaction falling within an exclusion would, had it not been for the exclusion, have fallen within the exemption. The exclusions certainly do show that transactions of the sort described are capable of falling within the exemption, and that it is the intention of the Council that they should not do so. So it is not necessary to ask whether a contract under which a person who takes a bedroom in a hotel is a contract of "letting of immovable property". It might or might not be. The answer would depend on the facts. A contract under which a room were taken for a week might well constitute a letting. A contract under which a room were taken for half an hour so that a man might consort with a lady would, I suggest, be very unlikely to be held to do so… In my opinion, the categories of exclusion in article 13B(b) and, for the same reasons, the categories of exclusion in paragraph 1 of Part II of Schedule 9 to the 1994 Act, do no more than indicate types of transaction capable of constituting a "letting" for the purposes of the Directive or of a "licence to occupy" for the purposes of the 1994 Act. Whether, in any particular case, the transaction would, had it not fallen within one of the excluded categories, have fallen within the exemption would have depended on the facts of the particular case.”
“(1) This paragraph applies where a supply of services consists in the provision of accommodation falling within paragraph (d) of Item 1 of Group 1 in Schedule 9 and— (a) that provision is made to an individual for a period exceeding 4 weeks; and (b) throughout that period the accommodation is provided for the use of the individual either alone or together with one or more other persons who occupy the accommodation with him otherwise than at their own expense (whether incurred directly or indirectly). (2) Where this paragraph applies— (a) the value of so much of the supply as is in excess of 4 weeks shall be taken to be reduced to such part thereof as is attributable to facilities other than the right to occupy the accommodation; and (b) that part shall be taken to be not less than 20 per cent.”
“(3) In order to reduce disparity of treatment between people who live residentially in hotels, etc., for long periods and those who occupy normal domestic accommodation, the 1972 Act also provides (in Sch. 3, para. 7 [now VATA 1994, Sch. 6, para. 9]) that where a stay in a hotel lasts more than four weeks, the value of the supply of accommodation and facilities, but not of meals and extras, is reduced for value added tax purposes for the period in excess of four weeks by excluding the value of the right to occupy the accommodation. The reduced value must not be less than 20% of the amount payable for the accommodation and facilities; if in particular cases the amount payable for facilities is higher than 20%, then tax is chargeable on that higher percentage. (4) This arrangement has enabled the United Kingdom to avoid the considerable legislative complications which would have arisen if it had been necessary to define the various types of accommodation for value added tax purposes. It has also avoided the necessity to treat as partly exempt traders those hoteliers who provide both short and long-term accommodation; and at the same time, it has reduced economic distortion and incentives to tax evasion. It is considered that the amount of input tax which would have been borne by the hotelier if exemption had applied is negligible. (5) All hoteliers using the provision are required to enter on their value added tax returns the full value of their supplies, irrespective of the status of the resident. Accordingly, the arrangements will have no effect on their own resources calculation. (6) The arrangements have proved simple to operate for both officials and traders alike, at virtually nil cost to the Revenue. It is the view of the United Kingdom that they conform with the requirements of para. 1 of art. 27 of the directive and may therefore continue to apply after1 January 1978 .”