Car boot sale business wins £87k VAT case
A taxpayer has won an appeal against a VAT and interest assessment worth £87,795 with the court ruling that they ran an ‘ordinary car boot’ and the pitches it rented out were zero-rated
The First Tier Tribunal (FTT) ruled in favour of Rufforth Park Ltd and against HRMC’s VAT and interest assessment totalling £87,295 finding that the pitches the business rented out for its Sunday car boot sale were classed as zero-rated and exempt from VAT.
Rufforth Park is a small family business that runs car boot sales on a field it owns in Wetherby near Leeds. Car boot sellers paid £9 for a pitch on the day and were allocated a pitch on arrival with advance bookings or selection of a pitch not being available to sellers.
When the business first began, they approached HMRC to ask whether they should charge VAT on the sale of its pitches with the tax authority telling them that they should.
Later on, HMRC agreed that they did not need to charge VAT as similar businesses were not and the tax office then refunded Rufforth Park of all the VAT it had paid, and the business did not pay VAT from then onwards.
After an examination of the business’ accounting records, HRMC made a ‘best judgment’ decision and issued a VAT assessment in December 2019 for £82,995 for the VAT periods December 2016 to March 2019 as the pitches should have been classed as standard rated.
HMRC stated that as the car boot had been running for 40 years, the reputation of regular events is part of the supply the stallholder receives and the amenities such as an onsite café, toilets, after-event cleaning, advertising in newspapers and the radio, and the facility of covered pitches were also part of the supply.
These additional services were a single ‘overarching supply’ and the right over land was one element in a predominantly standard rated supply.
In February 2020, Rufforth Park then received a default interest assessment of £4,800 to which they appealed to the First Tier Tribunal to appeal both assessments.
Rufforth Park argued that the rental of the pitch was a relatively passive activity linked to the passage of time and not generating any significant added value and so is zero-rated.
The main issue in front of the tribunal was whether the car boot sale pitches supplied by Rufforth Park represented ‘grant of any interest in or right over land or any licence to occupy land’ within schedule 9 of Value Added Tax Act 1994 (VATA).
HMRC relied on the Upper Tribunal’s decision in the case of Craft Carnival [2016] in its argument to the tribunal.
The Craft Carnival case concerned the sale of stalls at three-day craft fairs held at different country houses in Dorset. The fairs were heavily marketed and sellers paid £180 for their stall by booking and paying in advance.
The First Tier Tribunal compared the cases and stated that for Craft Carnival ‘a seller paid their fee, not for the right to occupy a pitch, but for a service, being the participation at an expertly organised and expertly run event, one element of which was the right to occupy a specific pitch. The activities of the organisers provided significant added value’. As such the supplies in Craft Carnival were found to be standard rated.
In comparison to Rufforth’s supply, it decided that the Rufforth Park’s added supplies such as the café, toilets, cleaning and the advertising provided were ‘quite basic’ as it did not offer tables, chairs or electricity, even for an extra fee, or security which Craft Carnival did. The tribunal added that the business also had ‘no obligation to even put on the events at all’.
The tribunal found that because of this, the supplies were ‘a relatively passive activity linked to the passage of time and not generating any significant added value’ as they are not giving the sellers the opportunity to participate in an ‘expertly organised and expertly run event’.
The tribunal ruled here that these supplies offered did not alter ‘the overarching nature of the single supply as a supply of a licence to occupy land’.
It concluded that the ‘commercial and economic reality is that the supply provided by Rufforth Park is a licence to occupy a pitch at a car boot sale or auto jumble’ and that overall Rufforth Park’s events were just an ‘ordinary car boot’.
The tribunal dismissed the VAT and default interest assessments totalling £87,795 and ruled that the standard of supply was zero-rated.
Sarah Kay, senior tax writer, Croner-i commented: ‘Given that HMRC’s Public Notice 742 expressly states that ‘granting traders a pitch in a market or at a car boot sale’ (section 2.6) is an example of a licence to occupy land which is exempt from VAT (subject to the option to tax) the fact that this case was taken in the first place is surprising.
‘Throughout the decision, the FTT refers to supplies that are within Item 1 of VATA Sch. 9, Grp. 1 as being zero-rated. This is incorrect, these supplies are exempt from VAT. Given the fundamental difference between zero-rating and exemption for VAT purposes, this mix up in terminology is unfortunate, to say the least.’
Story by Ruby Flanagan of Accountancy Daily