Colaingrove Ltd. v The Commissioners for Customs and Excise

The power in art 13B(b) of the VAT Sixth Directive (77/388/EEC) permitting Member States to apply further exclusions from the exemption for lettings of immovable property is not itself an exception to the general charging principle. It is therefore construed broadly. The power is subject to limits, but a specifically targeted derogation bringing seasonal caravan pitches within VAT is permissible where those pitches are not used for dwelling purposes. The principle of equal treatment does not require a wide-ranging comparison of materially different transactions. It requires practically identical transactions to be treated alike. A reference to the European Court is unnecessary where the applicable principles and their application are clear.

Colaingrove operated caravan parks and granted customers licences to occupy seasonal caravan pitches. The pitches were subject to restrictions preventing permanent residential use, including a prohibition on occupation during the winter months. The appellant accepted that the arrangements fell within the domestic definition of seasonal pitches in Schedule 9 Group 1 of the Value Added Tax Act 1994, but argued that the domestic provisions were incompatible with art 13B(b) of the VAT Sixth Directive (77/388/EEC).

The appeal was brought from a VAT Tribunal decision dated 20 July 1999. The central questions were whether the domestic treatment was authorised by the Directive’s further-exclusions power, whether it was discriminatory or irrational, and whether a reference to the European Court was required.

1. Appeal dismissed. The domestic provisions subjected the appellant’s seasonal caravan pitches to VAT, and the court held that the issue was acte clair, so no reference to the European Court was required.
2. The general rule that exceptions to VAT exemptions are construed narrowly did not apply to the tailpiece of art 13B(b). That provision authorises Member States to derogate from the exemption and gives them a wide discretion to bring further transactions within the charge to tax. The reasoning in Blasi v Finanzamt Munchen, Case C-346/95, and Amengual Far v Amengual Far, Case C-12/98, supported that conclusion.
3. The discretion is not unlimited. However, this case concerned a specifically targeted derogation rather than a wholesale removal of the exemption. The restrictions on the pitches meant that they were outside dwelling purposes. If the wider exclusion of all non-dwelling lettings upheld in Amengual Far v Amengual Far was permissible, the lesser exclusion of seasonal pitches was also permissible.
4. The principle that equivalent transactions must not be treated differently was accepted. Lubbock Fine v Commissioners of Customs & Excise, Case C-63/92, concerned practically identical transactions with symmetrical effects. It did not require the court to compare materially different transactions, weigh their common and differing elements, and decide whether the legislative policy was irrational. Treating long hotel stays differently from seasonal caravan pitches was not irrational or discriminatory.
5. The reference to a common list of exemptions in Recital 11 did not alter the conclusion. The appeal was dismissed.

• High Court (Chancery Division): Mr Justice Jacob dismissed the appeal from the VAT Tribunal’s decision of 20 July 1999.