Next Generation Clubs Limited v The Commissioners for HMRC [2026] UKFTT 976 (TC)

[2026] UKFTT 00976 (TC)Case No TC 09931
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 17-19 March 2026Date Judgment date: 29 June 2026
Taylor House, London
Appeal reference: TC/2024/03423
Keywords
Before
TRIBUNAL JUDGE FAIRPO
Between
NEXT GENERATION CLUBS LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Jonathan Bremner KC of counsel, instructed by Reynolds Porter Chamberlain LLP. for AppellantAndrew McNab of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs. for RespondentsDECISION

Introduction

[1]This is an appeal against the Respondent’s decision of 29 November 2024 to reject an error correction notice (“ECN”) filed by the Appellant on 26 April 2023 for the period 15 July 2021 to 31 March 2022.[2]The ECN was submitted in order to claim repayment of output tax in respect of membership subscriptions for the relevant periods. This was on the basis that the temporary reduced rate of VAT (“TRR”) should apply to those subscriptions under Group 16 of Schedule 7A to the Value Added Tax Act 1994.[3]The Appellant is the representative member of the VAT group whose entities operate leisure and recreational sites trading under the “David Lloyd” and “Harbour Club” brands. For convenience, I refer to the Appellant as “David Lloyd” and the Respondent as HMRC throughout this judgment. References to “David Lloyd” activities include the group’s activities across both the David Lloyd and Harbour Club brands. This reflects the approach taken in the hearing.[4]The appeal turns on the interpretation of the legislation conferring the TRR and whether the services provided by David Lloyd fall within that legislation.

Relevant law

[5]Excerpts of the relevant legislation and references for the relevant cases in this judgment are below. Unless otherwise specified, references to “Group 16” shall be to Group 16 of Schedule 7A Value Added Tax Act 1994. Similarly references to “Annex III” shall be to Annex III of Directive 2006/112/EC.[6]The Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 – Article 4 inserts Group 16 into Schedule 7A to the Value Added Tax Act 1994.[7]Group 16 of Schedule 7A to the Value Added Tax Act 1994: Item No 1 Supplies of a right of admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas and exhibitions and similar cultural events and facilities but excluding any supplies that are exempt supplies by virtue of Items 1 or 2 in Group 13 of Schedule 9.[8]This provision was derived from Article 98 of Council Directive 2006/112/EC (the “Principal VAT Directive” or “PVD”) which allowed the UK to set a reduced rate in respect of particular types of supplies.[9]The types of supplies to which a reduced rate could be applied were set out in Annex III of the PVD, and included: (7) admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities; (13) admission to sporting events; (14) use of sporting facilities;[10]It was common ground between the parties that the Tribunal should look to EU legislation and case law to interpret Group 16, and I saw no reason to disagree with their approach. I have therefore not set out the relevant reasoning around the implementation period for the UK’s withdrawal from the EU here.[11]UK case law referred to in this decision:(1) Revenue and Customs Commissioners v Esporta Ltd [2014] STC 1548 (“Esporta”)(2) R (on the application of Project for the Registration of children as British Citizens and another) v Secretary of State for the Home Department [2023] AC 255(“PRCBC”)(3) Ingliston Driving Experiences Ltd v The Commissioners for His Majesty’s Revenue and Customs [2025] UKFTT 564 (TC) (“Ingliston”)[12]EU case law referred to in this decision:(1) Ministre de l'Economie, des Finances at de l'Industrie v Gillan Beach Ltd (C-114/05) [2006] STC 1080 (“Gillan Beach”)(2) Erotic Center BVBA v Belgium (Case C-3/09)[2010] STC 1018 (“Erotic Center”)(3) Phantasialand v Finanzamt Brühl (Case C-406/20) [2021] (“Phantasialand”)[13]This decision is not intended to address every point put to us, although I have taken into account all the evidence provided and the submissions made.

Issues for the Tribunal

[14]The essential question in this appeal was whether the services provided by David Lloyd fell within Group 16: in particular, did David Lloyd’s services count as “rights of admission to…similar cultural events and facilities” to those in the list?[15]There was no particular submission that David Lloyd’s offerings were “cultural events”. The parties’ focus was on whether David Lloyd offered “similar [cultural]…facilities.” Whether the word “cultural” should be read as implied into that description of facilities was a point of contention between the parties. Evidence Documentary

Evidence

[16]The Tribunal was provided with a bundle of 1023 pages (not all of which was evidence) and nine marketing videos. The evidence included:

David Lloyd business overview

[17]David Lloyd Clubs’ business was described in the strategic report section of their accounts (the following taken from the 2023 Annual Report) as:
“David Lloyd Clubs (“DLC”) helps members to live life better with a focus on physical and mental wellbeing and a sense of belonging. We are Europe’s leading premium health and wellness group operating 133 Clubs – 103 Clubs in the UK and a further 30 Clubs across mainland Europe, comprising three brands David Lloyd Clubs, Harbour Clubs and David Lloyd Meridian Spa and Fitness in Germany. Our clubs provide the perfect destinations to stay fit and healthy as a family. Helping our members to live a better life with a focus on physical and mental wellbeing and a sense of belonging is core to our ethos and member offering. Facilities include state-of-the-art gyms, heated indoor and outdoor pools, top class racquets facilities, well-equipped group exercise studios and luxurious spas. And if you need a place to meet with friends or enjoy a bite to eat, our clubs also feature large and inviting spaces to work, relax and socialise. Our members and over 10,000 team members make a positive impact on the communities and environment in which we operate. We have an expert health and fitness team of over 2,000 and more than 680 tennis professionals work with us. David Lloyd Clubs’ racquet facilities are unparalleled with over 1,080 tennis courts, 400 badminton and squash courts as well as 90 padel courts … Our vision is “My Club for My Life”
. Our clubs are places for me-time and your together-time, your work, rest and play time under one roof. They improve the lives of our members and provide a home away from home under our ‘My Club for My Life’ ethos. However you use us, we can improve your life for all of your life, and you will feel part of your Club. Nobody builds a sense of belonging like David Lloyd Clubs. We’re passionate about making our clubs a comfortable and welcoming place to come together with friends, family and fellow members to maintain physical and mental health and wellness. We seek to create an environment where all members develop a real sense of belonging to their local clubs and where the clubs become an integral part of members’ lives, throughout their lives.”[18]The Tribunal had evidence, which was not disputed, of the range of facilities and events at David Lloyd clubs. There was some variation in which of these facilities were present between different David Lloyd clubs but I find that the following was generally representative for the periods under appeal:(1) Indoor and outdoor pools;(2) Gym;(3) Group Exercise Studios;(4) Clubrooms - areas to sit where food is served and there may be a “grab and go” fridge with food available for purchase;(5) Racquet sport courts;(6) Spa facilities;(7) Creche;(8) Children’s activity area – mix of indoor soft play and outdoor playgrounds; and(9) Co-working spaces[19]There was a range of events held at the clubs, including (not necessarily all available at every site in the periods under appeal):(1) Racquet sports tournaments/events(2) Lifeguard training(3) Barbecues(4) Wine tasting(5) Spa champagne events(6) Wellness retreat days(7) Nutritional courses(8) Yoga retreats(9) Holistic workshops(10) Classes for children between 3 and 11, including Scooter Squad, Science Squad, Design Squad and Legal Squad.[20]There was also a range of events focussed on children, including (again, not necessarily all available at every site in the periods under appeal):(1) Art Workshops(2) Children’s Winter Ball(3) Chocolate Cooking Class(4) Code Camp(5) Cricket Workshop(6) Drama Workshop(7) YouTube creators(8) Jedi School(9) Zoolab Animal Experience Workshop(10) Superhero School(11) Monkey Music(12) Family Disco(13) Family Pool Party(14) Family Tie Dye(15) Family Easter event(16) Family Halloween Party[21]Events marked “Family” were designed for parental attendance. The others envisaged parents leaving their children in the care of David Lloyd staff.

Terms and conditions of membership

[22]The Tribunal was provided with the standard terms and conditions for a David Lloyd membership and those for the Harbour Club. I include below excerpts of significance, taken from the October 2019 terms and conditions. There was no indication that there were any significant differences for other periods. 3(a) You are entitled to use the facilities available under your category of membership. Your club will give you information about the range of facilities available to you and when you can use them. Each category of membership may have certain restrictions which only apply to that category of membership. We will tell you about these restrictions when you join or when you change your category of membership, whichever applies. You can also get details from our website. 11(a) You and any other linked adult member (except nannies) can introduce guests to your club. You or the linked member introducing the guest must: - sign in any guests at reception; - stay with the guests at all times; and make sure the guests are aware of, and keep to, our rules and regulations set out in ‘Part B –rules and regulations for using facilities’. 11(c) Social guests (guests who are only entitled to use the café bar and not the sports facilities) will be able to visit the café bar only and there will be no fee for this. Social guests are not allowed to use your club at peak times (please ask your club for details of these times) or before 2pm on Saturdays, Sundays, bank holidays and public holidays. 11(g) You can sign in the same adult guest up to six times a year, but no more than twice in any month. 17(d) If you do not pay for your membership, we may prevent you and any linked members (adults or children) from entering any club. This does not mean we will end your membership.[23]The parties drew the Tribunal’s attention to David Lloyd’s Strategic Report for the year ended 31 December 2023. This is part of David Lloyd’s Annual Report for that year. I copy significant sections below. David Lloyd Clubs ("DLC") helps members to live life better with a focus on physical and mental wellbeing and a sense of belonging. We are Europe's leading premium health and wellness group operating 133 Clubs - 103 Clubs in the UK and a further 30 Clubs across mainland Europe, comprising three brands David Lloyd Clubs, Harbour Clubs and David Lloyd Meridian Spa and Fitness in Germany. Our clubs provide the perfect destinations to stay fit and healthy as a family. Helping our members to live a better life with a focus on physical and mental wellbeing and a sense of belonging is core to our ethos and member offering. Facilities include state-of-the-art gyms, heated indoor and outdoor pools, top-class racquets facilities, well-equipped group exercise studios and luxurious spas. And if you need a place to meet with friends or enjoy a bite to eat, our clubs also feature large and inviting spaces to work, relax and socialise. Our members and over 10,000 team members make a positive impact on the communities and environment in which we operate. We have an expert health and fitness team of over 2,000 and more than 680 tennis professionals work with us. David Lloyd Clubs' racquet facilities are unparalleled with over 1,080 tennis courts, 400 badminton and squash courts as well as 90 padel courts. We are 'Premiumising' our offering to deliver yield and to further differentiate David Lloyd Clubs ("DLC") from other competitors. The Group has continued to develop its product range to deliver an overall premium health and wellness experience. DLC bespoke products include Blaze, Cyclone, Rhythm, Battlebox, Spirit and Ignite. A key strategic initiative in this area has been the roll out of our spa retreats. We now have 31 open as at the date of this report, and are delighted with the positive reception that they have received from our members. As we open these spa retreats, we premiumise other club facilities. Not every club within the estate has the space to accommodate a spa retreat so we are reviewing how we premiumise these clubs. We continue to improve the overall offering from the look, feel and style perspective as part of our strategy to further differentiate from the market. For example, we believe there is an opportunity to invest in facilities to expand and premiumise gyms, outdoor dining areas, co-working space, pools and locker areas. In addition, we are further investing in wellness innovation, including offering more fitness and wellness opportunities outdoors for members who want to exercise and relax outside, all year around. We continually innovate to offer the best products and services for families and individuals in welcoming surroundings including state-of-the-art gyms, heated indoor and outdoor pools, top-class racquets facilities, well quipped group exercise studios, luxurious spas, kids club facilities and creches. We now offer facilities for the increasingly popular racquet sports Padel and Pickleball and we continue to implement our signature products and classes including Battlebox and Blaze Rebels across more clubs.

Social planner

[24]The Tribunal was taken to iterations of the social planner for different David Lloyd clubs. Trends in the events were sports (particularly racquet sports), themed exercise (e.g. a “cycle battle” based on Star Wars), relaxation and dance. The children’s and family events often involved sports or dance, but included other events such as a “super slime party”. “Premiumisation”(site improvements)[25]The Tribunal was taken to an exhibit to Mr Burrows’ witness statement. This undated document showed photos of two sites which had undergone improvements described as “premiumisation”. This exhibit also provided a breakdown of where the average total spend on premiumisation (c.£5m) was applied to each premiumised club. The percentages were as follows:(1) Spa Retreats – 41%;(2) Clubroom – 17%;(3) Change/Showers – 17%;(4) Fitness Studios – 15%;(5) Pool/Outdoor – 7%; and(6) Other Member Facing – 4%.[26]The Strategic Report for 2023 discussed David Lloyd’s premiumisation efforts, emphasising the roll out of spa retreats.

Marketing videos

[27]These were short videos of between 3 and 30 seconds in duration. One of the very short videos featured children painting; two videos focussed on spa activities; the remaining six videos primarily featured sporting activities.

Witness evidence

[28]The panel had written and oral witness evidence from Mr Russell Barnes, Mr James Willis, Ms Andrea Dearden and Mr Patrick Burrows. I considered that all the witnesses gave evidence honestly and to the best of their ability within their areas of knowledge.

Mr Russell Barnes

[29]Mr Barnes is a director of Deuce Midco Limited. This is the holding company for David Lloyd Limited and other subsidiaries. His evidence focussed on David Lloyd’s business model and market.[30]Mr Barnes articulated the target market of David Lloyd as “aspirational” families with disposable income. He indicated this was reflected in the high proportion of families and couples that make up the membership (50% and 20% respectively). He described a key focus of David Lloyd’s business strategy as being aimed at maximising “dwell”, i.e. the amount of time that members spend in the club. This was because David Lloyd’s data indicated a correlation between “dwell” time and the likelihood that a member would retain their membership and so continue to pay subscription fees. Part of this strategy involved the concept of “premiumisation” – making improvements to the clubs that include expanding their offering. Mr Barnes considered that this was intended to provide members with more incentive to use David Lloyd and so continue to remain as members. He acknowledged that this in turn allowed membership to attract an affluent market and command higher fees.[31]Mr Barnes contended that David Lloyd was more akin to a “club” than a pure health and fitness provider. He highlighted the social and community aspects of David Lloyd’s offering. He noted that the club had moved from a focus on competitive racquet sports such as tennis to more social ones such as padel and pickleball. He also noted the non-sporting aspects of the offering, e.g. a full-service restaurant in the “Clubroom” and numerous “clubs within clubs”, e.g. a book club, which members could join. He gave an example of coming to David Lloyd to have a coffee and for children to enjoy soft play as something a conventional gym membership would not offer. Mr Barnes stated that David Lloyd was not prescriptive in how members use their membership and rather sought “to create an environment where the members use the clubs as they see fit, and the more they use it, the more value they get”.[32]When asked about membership and access to David Lloyd’s facilities, he confirmed that only members or guests of members were permitted entry, and there were restrictions on when and how often guests could be brought by a member.[33]Mr Barnes was of the view that David Lloyd had carved out a unique position in the market and so had no single direct competitor. He considered that David Llloyd’s market competition was effectively the range of different businesses in which a target aspirational family might spend their discretionary time and thus their disposable income. He drew parallels with businesses such as Merlin and Centre Parcs “and other leisure and hospitality businesses with a strong family element that caters for multiple generations”.

Mr James Willis

[34]Mr Willis’ role is that of Group Operations Director on the executive committee, although he is not a statutory director of any of the companies in the group. His evidence expanded on the competition faced by David Lloyd. He noted that there were other providers that offer individual elements of David Lloyd’s offering such as swimming pools, cinemas and children’s soft play. He regarded the club membership package as a unique product in its own market.[35]Mr Willis provided more detail on membership and the ability to access David Lloyd facilities as a guest. A “platinum” member was allowed one free guest per month. There was an additional guest fee if the guest also wished to access any spa facilities.[36]Mr Willis also gave evidence of the range of events provided as part of David Lloyd clubs’ social calendar. Some of these were free for members (such as quiz nights and family discos). A number of events required attendees to purchase a ticket, such as “breakfast with Santa” or “the larger tribute evenings if we’re buying in a band or performer”. He indicated that non-members might attend these ticketed events without being a guest of a member. He did not give any detail as to the proportion of social events that are ticketed and open to non-members.[37]In line with his colleagues Mr Willis regarded David Lloyd’s offering as unique. He drew attention to the aim of building a sense of belonging to the club, based on the business vision of “my club for my life”. He emphasised the social aspects of membership and the range of activities involved, highlighting the science and cooking classes for children at David Lloyd.[38]Mr Willis described the main membership types as:(1) Platinum - the most popular, allowing unlimited access to the facilities at a home club plus access to selected other clubs and facilities.(2) Plus - access to club facilities at any time, but members do not have access to racquets, exclusive spa facilities and Blaze classes.(3) Club - access to club facilities at off-peak times during the day (11am to 4pm on weekdays and after 2pm on weekends). Members also do not have access to racquets, exclusive spa facilities and Blaze classes.

Ms Andrea Dearden

[39]Ms Dearden’s role is that of Marketing Director for David Lloyd, although she is not a statutory director of an of the David Lloyd companies. Cross-examination for Ms Dearden was brief, focussing on the social elements and the introduction of co-working spaces. She noted that members had consistently worked from David Lloyd sites and the introduction of specific co-working spaces was intended to facilitate this. She noted that some members used David Lloyd sites for business networking, particularly at the top end of the range of sites, including the Harbour Club.[40]Ms Dearden described David Lloyd’s focus as being on “wellness” rather than “fitness” and reflecting a broader concern with general physical/mental wellbeing. She identified social connections as an important part of this.[41]Ms Dearden also described the focus on family and children-focussed elements within David Lloyd, and how this was reflected in the membership. She described David Lloyd clubs as a “third space” and a “home away from home”.[42]Ms Dearden was asked about the video evidence discussed at paragraph 27 27above. She explained that the shorter videos are for social media and the longer ones for television advertising.

Mr Patrick Burrows

[43]Mr Burrows is the Chief Financial Officer for David Lloyd. He is a statutory director of Deuce Midco Limited and Next Generation Clubs Limited.[44]Mr Burrows expanded on the role of racquet facilities in the David Lloyd offering. He identified that 10 to 20% of members play tennis. However, this did not include padel and pickleball, which are more popular.[45]Mr Burrows provided additional information on the “clubs within clubs” as part of David Lloyd’s offering. He explained that these clubs were generally run by members, with assistance from David Lloyd. For example, in book clubs it would be members who organised the book choices and decide on dates. David Lloyd would provide the space for the meeting, advertise the meetings and provide tea and coffee. He gave the triathlon club as another example of this type of “clubs within clubs”. He regarded these clubs as mainly managed by the members, with David Lloyd supplying “the energy” for them. He drew a distinction between these club meetings and other events such as barbecues, where David Lloyd took the lead organisational and management role.[46]Mr Burrows accepted that there were capacity restrictions on membership at a number of David Lloyd sites, to ensure an enjoyable experience for the members as negative feedback could occur if the clubs get too busy.

Findings of Fact

[47]Based on the evidence summarised above and the documentary evidence before the Tribunal, I make the following relevant findings of fact in respect of the period under appeal, 15 July 2020 to 31 March 2022.

Facilities at sites

[48]David Lloyd clubs generally involve the following components: Sports facilities (1). Swimming facilities with associated training/classes; (2). Gym facilities for cardiovascular exercise and weightlifting with associated training/classes; (3). Racquet sport facilities with associated training/classes, with a growing emphasis on more social racquet sports such as padel and pickleball; Social facilities (4). A “Club Room” which provides a general seating and socialising area where members can order food and drink including full meals. There may also be an area for ‘grab and go’ food; (5). Space for social clubs, e.g. book clubs which are largely organised by members; (6). The provision of other social events, e.g. quiz nights, disco nights, film nights, which are generally organised by David Lloyd; Other facilities (7). Spa facilities, including treatments; (8). Wellness classes that straddle sports and relaxation, e.g. yoga and pilates; (9). Children’s activities (which may make use of the sporting facilities); (10). Workspaces[49]I find that no individual element (even when aggregated as above) is so dominant that it eclipses the others.

Membership

[50]There are three types of membership available:(1) Platinum membership, the most popular provides: (a) Gym access and use; (b) Swimming Pool access and use; (c) Fitness Classes; (d) Racquets; (e) Blaze (a particular type of fitness class); (f) Unrestricted hours; (g) Monthly guest pass; (h) Fresh towel on every visit; (i) 10% discount in Bar & Restaurant; (j) 10% discount on DL Kids courses; (k) Access to exclusive digital content; (l) Access to multiple clubs(2) Plus membership provides only items 50(a), 50(b), 50(c) and 50(f)(3) Club membership provides items 50(a), 50(b) and 50(c) at off-peak times only (11am to 4pm weekdays, after 2pm weekends).[51]Failure to pay for membership means that David Lloyd may prevent the relevant member, and any linked members, from entering any club but does not mean that the relevant membership will be ended.

Guests

[52]Platinum members are permitted to bring guests to the club to the extent permitted by membership; guests who want to use the facilities must pay a fee, which may vary by club. The guest must be accompanied by the member.[53]Members may bring social guests (guests who are only entitled to use the café bar and not the sports facilities) without a fee. These guests are able to visit the café bar only. Social guests are not allowed to use the clubs at peak times or before 2pm on Saturdays, Sundays, bank holidays and public holidays.[54]The same adult guest may access the club up to six times a year, but no more than twice in any month. Discussion There were two issues referred to briefly by the parties which I have set out here for completeness, although they were not relied upon by the parties. Fiscal neutrality[55]The arguments in this appeal originally included reference to fiscal neutrality; in the hearing. Mr Bremner accepted that he needed to make his case on the question of “similarity” separately from fiscal neutrality and clarified that he was not advancing fiscal neutrality as a separate basis for Group 16 applying to David Lloyd’s supplies.[56]Mr McNab argued that fiscal neutrality could not extend the scope of the TRR Order, given that the UK chose to implement Item 7 of Annex III effectively verbatim in domestic law. He contrasted this with the approach of German law discussed in Phantasialand where Germany had selected items from the list rather than adopt it in its entirety. In response, Mr Bremner resisted assertions that fiscal neutrality was irrelevant. He agreed it could not extend the scope of the TRR Order but was relevant to working out the “contours” of the regime.[57]Mr Bremner acknowledged that if he demonstrated that David Lloyd’s supplies were sufficiently similar to those listed in Group 16, he would not need to draw on fiscal neutrality. Equally if he could not demonstrate the required similarity then the principle of fiscal neutrality would not assist in expanding the meaning of the list to encompass David Lloyd.[58]Given the parties’ approach and submissions, I have not considered fiscal neutrality as a separate issue in this appeal: the principle of fiscal neutrality precludes treating similar goods or supplies of services, which are effectively in competition with each other, differently for VAT purposes. Group 16 requires a consideration of similarity and so effectively contains the fiscal neutrality requirements within it; I consider that the CJEU’s comments and considerations regarding ‘similar’, which were expressed in that case in relation to fiscal neutrality, are relevant to the concept of similarity for the purposes of Group 16.

Discrepancies in approach

[59]Mr Bremner stated that there were discrepancies between HMRC’s approach to this case and the position it has taken in other instances. He emphasised that he was not making a public law argument in raising these points but merely questioning the consistency of HMRC’s position. As Mr Bremner accepted, this Tribunal does not have judicial review powers. HMRC’s approach to other taxpayers and to the provision of examples in guidance does not determine whether or not David Lloyd’s supplies fall within the scope of the TRR Order.

Characterisation of the supply

[60]It was not disputed that there were aspects of David Lloyd’s supplies that might fall within Group 16 when viewed in isolation. Examples include the comedy nights and the jazz nights listed in the David Lloyd social planner, being a show and a concert respectively. However, I agree with both parties’ submissions that I must examine the supply as a whole.[61]Mr McNab contended that the David Lloyd supply, considered as a whole, was one of sporting facilities, which was a separate (potentially exempt) category within Annex III. He contended that, as the supply clearly fell within this separate category, it could not be a supply of a “cultural event or facility”. Mr Bremner contended that the categories were not mutually exclusive and that, in any case, any sporting element (the provision of gym and racquet sports facilities, for example) did not characterise the supply as a whole.[62]I consider that any aspects of the David Lloyd supply which might, considered in isolation, be within Group 16 are a minor part of the overall supply and certainly do not characterise that overall supply. Similarly, on the evidence before us, I do not consider that the sporting facilities provided were such as to categorise the supply as one of sporting facilities outside of Group 16: although much of the marketing material is focussed on fitness activities, noting for example that the children’s activities are often described as (in effect) enabling parents to focus on their fitness whilst someone else takes care of their children, I accept the witness’ evidence (as noted above in the findings of fact) that the supply involved a broader range of activities within which it is not possible to conclude that any one element was the principal supply with all others being ancillary.[63]I find therefore that this was not a supply of sporting facilities outside the scope of Group 16; it was a single supply of services which I need to examine as a whole to consider whether there was a supply within the scope of the TRR Order.

Approach to be taken

[64]As set out above, the TRR Order applies as relevant here to “supplies of a right of admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas and exhibitions and similar cultural events and facilities …”. It was common ground that David Lloyd’s supplies did not fall directly within any of the specific items in Group 16: the dispute was whether its supplies were of “similar cultural events and facilities”.[65]I note the well-established point that a reduced rate of VAT is a derogation from the principle that the standard rate of VAT applies to all supplies of goods and services and therefore provisions regarding to such derogation should be interpreted strictly.[66]In considering the nature of the David Lloyd supply, the parties agreed that the statutory provisions should be the starting point, to be read in context and as a whole and that a “strict but not overly restrictive” approach should be taken when interpreting statute. They differed somewhat in their views on how this should be approached in practice.[67]Mr Bremner argued for a purposive, contextual approach, focusing on the statutory language in its wider context and the legislative purpose behind Group 16 (COVID-19 economic support). He contended that external materials (such policy papers, explanatory notes, HMRC guidance) should be taken into consideration in order to determine the mischief addressed (support for leisure/hospitality sectors and the intended breadth of the reduced rate). He cited PRCBC in support of his content that this material can be relevant to statutory construction regardless of whether there is obvious uncertainty or ambiguity on the plain face of the wording.[68]Mr Bremner referred to the Explanatory Note to the TRR Order, the Explanatory Memorandum, the then Chancellor of the Exchequer’s “Plan for Jobs” speech and the corresponding HM Treasury policy paper and HMRC guidance on the same dated 9 July 2020. He argued that the combined effect of these documents showed that the TRR Order was aimed at alleviating the impact of the COVID-19 pandemic on businesses in the targeted sectors and that Group 16 should be read in that context. He also noted that the TRR Order was enacted without the customary 21-day rule applying for a statutory instrument. He suggested that the Tribunal should be mindful of the pace of this legislative process when deciding how to interpret it. He contended, in context that Parliament had intended that the TRR Order should have a wide economically support scope and that the statute should be read broadly enough to cover leisure and entertainment venues which were functionally similar to the listed attractions. Further, HMRC’s guidance and examples (referring to ten-pin bowling, crazy golf, climbing centres and similar activities) made it clear that the narrower stance which HMRC were applying in this case was inconsistent with how they had understood the relief to apply in practice.[69]Mr McNab contended that policy documents and COVID related background were irrelevant or of minimal weight where the statutory language is clear and could not be used to expand the scope of the legislation beyond its clear meaning.[70]I note the parties’ submissions and consider them in the discussions below. I also note Lord Hodges’ words in PRCBC at [30] that “none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity.” In the same decision, Lady Arden noted (at [66]) that this does not mean that it is open to me to use such external aids to find “a meaning which is not justified by the words that Parliament has used, or which is selected for some reason other than the presumed intention of Parliament”. I note further that both Lord Hodges and Lady Arden were considering Explanatory Notes which are now generally published alongside the relevant statute and not other material which, whilst publicly available, is not as closely aligned with the relevant statute.

Whether facilities need to be “cultural” to be within Group 16

[71]It was common ground that David Lloyd’s supplies were not supplies of events. The questions for the Tribunal were:(1) whether the word “cultural” applied to facilities as well as events; and(2) whether the David Lloyd supplies were “similar to” relevant facilities.[72]Mr Bremner submitted that the word “cultural” only described “events” and did not carry across to “facilities”. He argued that David Lloyd supplies were of “similar…facilities” to those identified in the list and so he did not need to show that they operated “cultural facilities”. Mr Bremner submitted that even if he were unsuccessful on this point and “cultural” did qualify facilities, this did not imply any particular kind of “high” culture. He relied on the inclusion of “fairgrounds” and “amusement parks” in the list to demonstrate this.[73]Mr McNab took the opposite view regarding “cultural”. He argued that the description as “cultural” was intended to be read across to cover facilities as well as events. He submitted that by the same logic “similar” would also not extend to cover “facilities”, which would mean Group 16 covered all facilities.[74]Mr McNab acknowledged that “cultural” did not necessarily involve high culture. However, he argued that a “cultural facility” should involve some cultural content or element. He cited Erotic Center and noted it considered whether the taxpayer provided a “right collectively to enjoy the cultural and entertainment services” “characteristic of” the events and facilities listed in item 7 of Annex III. He submitted that this indicated the supply must involve “cultural and entertainment services” in order to fall within Group 16 and that David Lloyd’s offering did not meet this requirement. He submitted there was no cultural component as there was no presentation of information, performance, display or experience with any cultural content. He submitted that a cultural event or cultural facility must “have such a place in the social and cultural heritage of the UK to form part of its culture, rather than being purely commercial or recreational”. Similarly, he submitted that “an event or facility cannot be ‘cultural’ if it contains no (or only a minimal) element of intellectual, artistic, educational, historical or heritage content that is of public or societal value.”

Discussion

[75]I note, as a reminder, that the items specifically listed in Group 16 are “shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas and exhibitions” and that “similar cultural events and facilities” are specified in relation to these.[76]Considering the submissions made, and noting that the specific items in Group 16 cover a wide spectrum of “culture”, I consider that the phrase “cultural events and facilities” is a description of the specific items listed in Group 16 rather than a separate definition. In our view, if a supply is sufficiently “similar” to the list in Group 16 (in context as set out below), then it will be a supply of a “cultural event [or] facility”. Whether David Lloyds’ supplies were similar to those listed in Group 16 Similarity - what does it attach to?

Whether David Lloyds’ supplies were similar to those listed in Group 16

[77]The parties differed as to the approach to be taken when considering similarity: for HMRC, Mr McNab contended that the supply needed to be similar to one or more specific items on the list and that it was not appropriate to look at similarity at a higher level of abstraction, citing case law such as Erotic Center, which had considered similarity to a cinema, and Ingliston, which had focussed on similarity to a fair or amusement park. Mr Bremner contended that I should look similarity in the context of the list as a whole, although he also made submissions as to similarity with a specific item.[78]In Phantasialand, the CJEU noted (at [38]) that:
“According to settled case-law, in order to determine whether goods or services are similar, account must primarily be taken of the point of view of a typical consumer. Goods or services are similar where they have similar characteristics and meet the same needs from the point of view of consumers, the test being whether their use is comparable, and where the differences between them do not have a significant influence on the decision of the average consumer to use one or the other of those goods or services (judgments of 27 February 2014, Pro Med Logistik and Pongratz, C-454/12 and C-455/12, EU:C:2014:111, paragraphs 53 and 54, and of 27 June 2019, Belgisch Syndicaat van Chiropraxie and Others, C-597/17, EU:C:2019:544, paragraph 48 and the case-law cited). In other words, it is necessary to determine whether the goods and services at issue are interchangeable from the point of view of an average consumer. If that is the case, the application of different VAT rates might affect the consumer’s choice which, in turn, would indicate an infringement of the principle of fiscal neutrality.”
[79]The CJEU in Phantasialand were considering an issue arising from German law, which applied a reduced rate to supplies relating to seasonal and temporary fairs, but not to amusement parks. Phantasialand operated a theme park and argued that German law infringed the principle of fiscal neutrality in distinguishing between fairs and amusement parks.[80]The CJEU concluded that a distinction had to be drawn between fairs and amusement parks, as they appeared separately in the list and so it was open to a member state to apply a reduced rate of VAT to one but not the other.[81]If they had not been distinct then the question of whether supplies were similar was to be considered from the point of view of a typical consumer, requiring determination of whether the supplies at issue were interchangeable from the point of view of an average consumer. Account needed to be taken of contextual differences which might create a distinction between the supplies in the eyes of the average consumer. When considering fairs and amusement parks, although there was a high convergence between fairs and amusement parks, the temporary nature of a fair might be an important, or decisive, factor for a consumer deciding which to visit.[82]Although the CJEU in Phantasialand concluded that a distinction had to be drawn between fairs and amusement parks, that conclusion was based on the question put to them (which refers only to fairs and amusement parks) and reached on the basis that each of those appeared on the list and so had to be distinguished, such that national law could apply a reduced rate in respect of one and not the other. It is not, in our view, authority for the proposition that similarity can only be considered by reference to specific items in the list. Indeed, the approach set out to the question of similarity - considering whether supplies were interchangeable from the point of view of a typical consumer, considering all of the circumstances - is equally indicative of the need to consider the list as a whole.[83]I note also that, in Gillan Beach (at [22]), the CJEU said (of a different list) that “an activity must be regarded as similar … where it includes features that are also present in the other categories of activities listed in that provision and which, in the light of that objective, provide justification for the application of that provision to those activities”.[84]Further, the CJEU, in Erotic Center (at [17]) concluded that the items in Group 16 (derived from the EU law being considered by the CJEU) “have in particular the common feature that they are available to the public on prior payment of an admission fee giving all those who pay it the right collectively to enjoy the cultural and entertainment services characteristic of those events and facilities.”[85]Although their discussion considered the similarity of the supplies to those of a cinema in that case, they clearly also considered the common aspects of the list as a whole.[86]Considering the CJEU case law and noting that a “strict but not overly restrictive” approach should be taken to statutory interpretation, I consider that both approaches should be applied: that is, that I should first consider if a supply is similar to one of the specific items on the list but, if it is not, I should then consider whether it is similar to the items on the list viewed as a whole, considering the characteristics common to the list.

Whether the supply is similar to any specific item in Group 16

[87]I consider first whether the David Lloyd supplies can be regarded as similar to any one specific item within Group 16.[88]Mr Bremner contended that David Lloyd sites should be regarded as “amusement parks” because the CJEU in Phantasialand (at [30]) held that the term “denotes a landscaped site containing various facilities for recreation and amusement” and that the David Lloyd sites were landscaped sites containing various facilities for recreation and amusement and so should be regarded as similar to amusement parks.[89]This submission was not, in our view, supported by the evidence provided to us. The photographs of David Lloyd sites provided had very limited examples of any external areas and there was no evidence of the extent to which the photographs were representative of all of the sites. The existence of outdoor tennis courts (and noting that some of the photographs of tennis were taken in indoor courts) and an outdoor training area is not, in our view, sufficient to bring the sites within the scope of the CJEU description of an amusement park. There were also photographs of “spa gardens” introduced at a couple of the sites, but these were dated 2025, some time after the relevant periods, and there was no evidence that they were in situ in the relevant periods.[90]The CJEU description was not, in our view, intended to be a comprehensive definition but was rather part of a discussion as to the distinction between amusement parks and fairgrounds which might initially appear to be very similar: in our view, this description was intended to effectively set up the points of similarity before discussing points of divergence.[91]Accordingly I do not consider that Phantasialand is, or was intended to be, authority for the proposition that any “landscaped site containing various facilities for recreation and amusement” is similar to an “amusement park” for these purposes. By that logic any park with a mixture of sports fields and gardens to walk in would qualify as an “amusement park”.[92]Secondly, the CJEU in Phantasialand made it clear that the test of similarity requires not only similar characteristics but also that they meet the same needs from the point of view of the average consumer. I have discussed this second aspect below, in the context of the common characteristics of the items on the list; for reasons set out there, I conclude that an average consumer would not consider the David Lloyd sites to meet the same needs as an amusement park.[93]For all of these reasons, I find that the David Lloyd sites are not similar to an amusement park in the context required. There was no contention that the David Lloyd supplies were similar to any other specific item in Group 16.

Whether similar to the items in Group 16 considered as a whole

[94]I therefore turn to consider whether the supplies are similar to the items in Group 16 considered as a whole: that is, to identify the common characteristics of the items in Group 16 and compare these to the David Lloyd supplies.[95]Mr Bremner contended that the common characteristics of the items in Group 16 were:(1) The public were able to access the facilities through a payment for admission rights;(2) They each involved a venue which hosted a range of activities and/or experiences for leisure and/or recreational purposes;(3) The listed items were each facilities which constituted destinations where paying members of the public gathered for social and recreational purposes.[96]Mr McNab challenged whether David Lloyd facilities were in fact open to the public. He submitted that David Lloyd’s services only being available to members was inconsistent with this. It was also noted that there were restrictions on the number of memberships. Mr Bremner submitted that this was the same as there being finite tickets available for an amusement park for a day. Once those tickets were sold then no further admissions were allowed and on that basis David Lloyd clubs are as open to the public as items in Group 16.[97]Considering this element, I do not accept that David Lloyd’s capacity restrictions are entirely analogous to a daily ticket limit at an amusement park. The capacity restrictions at an amusement park are time-limited: a member of the public might find tickets are sold out that day, but could organise themselves to be early enough to buy a ticket on another day, and may often be able to book in advance for a day where there is capacity. This is qualitatively different to the position with David Lloyd. There, if a capacity restriction is in place, it is not possible for a non-member to gain access (that is, become a member) unless and until sufficient existing members cease their membership.[98]I accept the witnesses’ evidence that David Lloyd does not otherwise restrict the ability of the public to access the venue by paying for membership.[99]Mr Bremner contended in summary that the key factor that united the items in Group 16 was that they were all activities which had a recreational purpose and which brought people together to relax, to use and enjoy the facilities predominantly for leisure purposes. It was this factor which, he contended, justified the legislative purpose of applying the TRR, and which should be taken into account when making a proper assessment of the ‘similarity’ of other supplies to be made.[100]I do not accept that this is a sufficient description of the common characteristics of the items of Group 16. I consider that there are further common characteristics which must be also taken into account when assessing similarity.[101]Firstly, each of the events and facilities listed involves an experience or type of experience that is the main attraction that draws customers in.[102]For the events (shows, concerts, exhibitions), this is straightforward: the main attraction is the event itself. For theatres the main attraction experience will be to see performances held at the theatre. Similarly, the main attraction experience in a cinema is the films shown there. For museums it is the exhibitions they show. For zoos it is the animals. For amusement parks it is the rides. For circuses it is the performances of the circus entertainers. For fairgrounds, it is a combination of rides and the (normally amateur) tests of skill like a coconut shy or “hook the duck”.[103]Each of these events may offer additional services. For example, there may be food vendors at an amusement park or fairground. Cinemas sell popcorn. Theatres have bars. It can be possible to attend these venues and solely make use of those additional services. However, it is still the main attraction that is the focus of the majority of their customers.[104]Mr Bremner and the witnesses from David Lloyd emphasised the great variety of elements that make up the David Lloyd offering. I have accepted this and made findings of fact to that effect. It follows from their evidence there is no main attraction experience that is the focus of David Lloyd clubs.[105]Secondly, a further common characteristic of the items in Group 16, related to the existence of a main attraction, is that the items on the list are designed to be extraordinary in a literal sense: not commonly part of day-to-day life.[106]It is, of course, possible that a serious zoology enthusiast might attend a zoo on a highly frequent basis making full use of a membership. In some cities, particularly London, it might be possible to attend a show or theatrical performance daily. However, as noted in Phantasialand, the question of similarity is to be considered from the point of view of an “average consumer” - not that of a serious enthusiast.[107]This is qualitatively different to David Lloyd’s business. The evidence was clear that David Lloyd continually reviews its offerings in order to maximise “dwell”. This involves encouraging members to use David Lloyd facilities as part of their everyday life. The David Lloyd vision is “my club for my life”. This is also reflected in the expansion to providing working spaces. The ideal David Lloyd member from the business’ perspective is one whose attendance is an ordinary and frequent occurrence.[108]In our view, the David Lloyd supplies are not “extraordinary” in the required sense: even if they might be said to involve an attraction (the “clubiness” mentioned by the witnesses, for example) they do not involve an attraction outside of ordinary day to day life. Indeed, David Lloyd appear to work quite hard to make their supply part of a member’s ordinary day to day life.[109]I consider that the average consumer would regard the supply as one of a “third space”, neither home nor work, where people may meet and undertake a range of regular everyday activities. The witnesses themselves used the term “third space” in describing David Lloyd’s business For the avoidance of doubt, the phrase “third space” is not intended to refer to the unrelated fitness business of that name but, as indicated in this paragraph, to the sociological concept of a “third space” which is a social space separate from the two usual social environments of home and workplace. .[110]In considering, therefore, whether the David Lloyd supply would meet the same needs as the items in Group 16 (noting the test in Phantasialand) I conclude that it would not: the average consumer, seeking an attraction within the scope of Group 16, would be seeking a main attraction which was extraordinary. They would not, in our view, consider the David Lloyd supply to meet those needs.[111]Mr Bremner, and the witnesses, made reference to items in Group 16 as being competition for the time and money of a potential David Lloyd member. However, whilst the items in Group 16 might well be options for people to spend the time and money that they could spend on a David Lloyd membership, I consider that there are many ways to spend that same time and money which clearly would not have the requisite similar characteristics and so could not be items in Group 16 (such as craft hobbies, even if the entire family takes part in these). If the supply is not otherwise similar to an item in Group 16, being competition with items in Group 16 for a person’s time and money will not bring that supply within Group 16.[112]I have noted Mr Bremner’s contentions with regard to the intended scope of the TRR Order. I also note the wording of the explanatory memorandum that the provisions were intended “to support employment and the reopening of businesses in the hospitality, accommodation and tourism sectors”. The speech and policy paper cited refers to “hospitality, accommodation and admission to certain attractions”.[113]The David Lloyd supplies are, self-evidently, not supplies of accommodation and are not supplies within the tourism sector. For the reasons set out above, I have concluded that they are not supplies of “attractions”. I do not consider that there is any ambiguity in the wording of the statute and, for this reason, I do not consider that the context indicated by the external material referred to creates any such ambiguity or in any way displaces the meaning conveyed by the words of the statute when considering David Lloyd’s supplies. Therefore, even if Mr Bremner’s contentions as to the extent to which external material should be taken into consideration are correct, I do not agree that the external material referred to would enable me to interpret the TRR Order widely enough to cover David Lloyd’s supplies.[114]On balance and in context, I do not agree that David Lloyd’s supplies are similar (functionally or otherwise) to the items in Group 16. The supplies therefore do not qualify for the reduced rate of VAT permitted by the TRR Order.

Was David Lloyd supplying a right of admission?

[115]Our decision above is enough to dispose of this appeal. However, as the parties made submissions on the question of whether or not the supply was of a right of admission, I have considered those points below.[116]Mr Bremner invited the Tribunal to follow Esporta in this context. This concerned whether late payments for membership of a gym constituted damages for breach of contract or payment for a supply of services.[117]In Esporta, the taxpayer operated health and fitness clubs with a one-year commitment period. If a member did not pay their fees during that initial one-year period the taxpayer would deactivate their swipe-card, denying the member access to the clubs. The member would retain their membership but not regain access until they brought their payments up to date. The Court of Appeal held that the supply was a conditional right of access to the club’s facilities, provided the members paid the monthly fees. The late fees were the payment for that supply.[118]Mr Bremner submitted that this was analogous to the situation in David Lloyd’s supplies. He highlighted the treatment of defaulting members in clause 17(d) of David Lloyd’s terms and conditions. These similarly involved members no longer being able to access David Lloyd facilities even though their membership remained valid. On that basis he argued that David Lloyd’s supplies were “rights of admission” in the same way that the taxpayer in Esporta was supplying “rights of access”.[119]For HMRC, Mr McNab submitted that the supply was one of membership, not a supply of admission to a cultural event or cultural facility. Whilst the supply might include admission, it was no more than an element of the overall bundle of membership rights. He directed the Tribunal to David Lloyd’s terms and conditions as the starting point for examining the nature of a supply. He submitted that these more closely resembled a supply of a package of related benefits through conferring membership. For example, the most popular form of membership (Platinum)[120]I agreed that there is a significant degree of similarity in the terms and conditions for David Lloyd regarding defaulting members (who are denied entry but whose membership is not ended) and the situation considered in Esporta. That decision considered the nature of overdue monthly payments made to Esporta and, in particular, whether these were payments for the supply of services under the membership contract or whether they were payments for a breach of contract. The services provided were held to be membership of the club and the right to access the facilities. The Court of Appeal concluded that, as the membership contract was not terminated on non-payment, the exclusion of members from facilities on non-payment did not mean that they were not being provided with services but, rather that they continued to be provided with the same services - being the right to the facilities provided that the monthly fees were paid.[121]In Esporta the court was seeking to make a rather more binary decisions (in effect, whether the payment was contractual, or for breach of contract). There was no particular argument as to what services were being provided when contractual payments were ordinarily made.[122]On balance, and on the evidence before us, I consider that the David Lloyd services are functionally equivalent to those in Esporta. I note Mr McNab’s submissions regarding the supply as being one of membership, but I consider that on the evidence before us, the membership is functionally a right of access to the relevant David Lloyd site or sites (depending on the type of membership). Any membership benefits, even for the Platinum membership, were all dependent on access to a David Lloyd site.[123]I find that “right of access” and “right of admission” are effectively similar: in our view, a right of admission is in respect of something whereas a right of access is respect of somewhere. In this context, I consider that the distinction between “access” and “admission” arises from the nature of the supply to which the right attaches.[124]Given our findings above, and in particular our finding that David Lloyd supplies are not supplies of an “attraction”, I would describe their supplies as being a supply of a right of access rather than a right of admission. If their supplies were within Group 16, the supply would be of a right of admission.

Conclusion

[125]For the reasons given above the appeal is dismissed.

Right to apply for permission to appeal

[126]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. Release date: 29 June 2026

Cited in 1 later judgment