Colaingrove Ltd. v Customs & Excise

The exemption for leasing or letting immovable property under article 13B(b) of the Sixth Directive gives member states a wide discretion to create further exclusions. The discretion has peripheral limits: the policy objective must accord with the rationale of the exemption, and the restriction must not be disproportionate. A practical and reasonable proxy may be used where direct assessment of actual use would be difficult. Excluding seasonal caravan pitches under the Value Added Tax Act 1994 was a reasonable means of taxing holiday and non-dwelling use. The exclusion was compatible with the Directive and did not unlawfully discriminate.

Colaingrove Ltd operated a caravan site and granted customers long licences to occupy seasonal pitches for static caravans. The Commissioners decided that the supplies were taxable under group 1 of part II of schedule 9 to the Value Added Tax Act 1994. The VAT Tribunal dismissed Colaingrove’s appeal on 20 July 1999, and Jacob J dismissed its appeal from that decision.

Before the Court of Appeal, Colaingrove argued that article 13B(b) of the Sixth Directive did not permit the United Kingdom to exclude seasonal pitches from the letting exemption. It also alleged discrimination and disproportionality, and sought a reference to the European Court. The central issue was whether the statutory exclusion was compatible with the Directive.

Arden LJ delivered the judgment of the court. Thorpe LJ and Neuberger LJ agreed. The appeal was dismissed and no reference to the European Court was required.

1. Article 13B(b) of the Sixth Directive confers a wide discretion on member states to add exclusions to the exemption for leasing or letting immovable property. The discretion has peripheral limits. A member state’s policy objective must be consistent with the rationale of the exemption, which is principally concerned with passive, long-term occupation rather than more active exploitation for holiday or storage purposes.
2. The court’s role is supervisory. It must ask whether the criterion selected by the member state is reasonable for the relevant purpose. It should not investigate the matter independently or substitute a different criterion merely because it appears preferable.
3. The seasonality test in group 1 of part II of schedule 9 to the Value Added Tax Act 1994 was reasonable. It identified caravan sites likely to be used for holiday rather than dwelling purposes and avoided the practical difficulty of determining the occupants’ actual use. The statutory exclusion was therefore compatible with article 13B(b).
4. The alleged discrimination failed. Member states may take account of their economic conditions and differences between types of immovable property. Long hotel stays and seasonal caravan pitches have materially different economic and social characteristics, so the hotel provisions could not simply be read across. Cottages let for holiday use were separately caught by the holiday-accommodation exclusion.
5. Once the United Kingdom chose to exclude seasonal pitches, it was not required to adopt the least burdensome formulation. It was nevertheless prohibited from imposing the restriction in a disproportionate manner. That limit was satisfied here.

• Court of Appeal (Civil Division) — dismissed Colaingrove’s appeal: [2004] EWCA Civ 146.
• High Court, Chancery Division — Jacob J dismissed Colaingrove’s appeal from the VAT Tribunal.
• VAT Tribunal — dismissed Colaingrove’s appeal from the Commissioners’ decision on 20 July 1999.