TC09528 - [2025] UKFTT 00564 (TC)

The supplies that are relevant to this appeal all took place before 31 December 2020, which was “IP completion day” (the final day of the implementation period for the UK’s withdrawal from the EU).

This means that EU law applies to this appeal, and we are bound by the case law of the Court of Justice of the European Union (“CJEU”) as regards CJEU decisions made before 31 December 2020. We are not bound by CJEU decisions made after that date, but we may have regard to them. This is the effect of sections 1A and 6 of the European Union (Withdrawal) Act 2018 as they applied at the relevant time. We note that the amendments that were made to section 6 by the Retained EU Law (Revocation and Reform) Act 2023 do not apply as regards any time at or before the end of 2023.

The VAT Directive (Council Directive 2006/112/EC) gives EU Member States the right to apply reduced rates of VAT to certain goods and services. The goods and services to which Member States may apply reduced rates are set out in Annex III to the VAT Directive. This includes, at Item 7:

“(7)

admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities;”

The CJEU considered the reduced rates of VAT in Erotic Center BVBA v Belgium Case C-3/09 [2010] STC 1018 (“Erotic Center”). That case concerned a business which provided cubicles in which people could watch films on a television screen. There was room for only one person in a cubicle at any one time. The court had to decide whether these supplies fell within the wording set out as Item 7 above, and so qualified for a reduced rate of VAT.

At [15], the CJEU explained that, because the reduced rates of VAT are an exception to the principle that the standard rate applies, provisions enacting reduced rates must be interpreted strictly. At [14] and [16], the court stated that the concept of admissions to a cinema must be interpreted “in the light of its context” within the VAT Directive, and “in accordance with the usual meaning of those words”.

At [17], the CJEU stated that the various events and facilities listed in what is now Item 7:

“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.”

The court concluded that the concept of admissions to a cinema did not cover a payment by customers to watch films on their own in private cubicles.

On the question of a requirement to interpret provisions strictly, Advocate General Jacobs observed in his opinion in HMRC v Zoological Society of London Case C-267/00 [2002] STC 561 at [19] that this is not the same as a narrow or restrictive interpretation. In the context of exemptions from VAT (which must also be interpreted strictly) he opined:

“[19]…Both the exemptions and any limitations on them must be interpreted in such a way that the exemption applies to that to which it was intended to apply and no more.”

Phantasialand v Finanzamt Brühl Case C-406/20 (“Phantasialand”) is a CJEU decision that was released after 31 December 2020, and so is not binding on us, but we may have regard to it. In its judgment, the CJEU gave guidance on the meaning of fairs and amusement parks for the purposes of Item 7:

“[29] Therefore, first, those concepts must be interpreted in accordance with their usual meaning in everyday language and, secondly, they must be interpreted strictly given that the possibility to apply a reduced rate of VAT constitutes a derogation from the principle of the application of a standard rate […]

[30] With regard to the usual meaning in everyday language of the expressions ‘amusement park’ and ‘fair’, as the Commission, in essence, noted in its written observations, the expression ‘amusement park’ denotes a landscaped site containing various facilities for recreation and amusement, whereas a ‘fair’, although, in general, also possessing the same facilities, is characterised by the fact that it takes place, albeit with a certain regularity, for a temporary period.”

In the UK’s domestic VAT legislation, section 29A(1) of the Value Added Tax Act 1994 (“VATA 1994”) provides that a reduced rate of VAT at 5% shall apply to supplies that are specified in Schedule 7A. The Treasury is empowered to add, delete and/or vary by order any supplies in Schedule 7A.

Schedule 7A was varied by article 4 of the VAT (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 to add a new Group 16, entitled “Shows and Certain Other Attractions”, which provided as follows:

“Item No. 1. Supplies of a right of admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, 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.”

Items 1 and 2 in Group 13 of Schedule 9 are not relevant to this appeal.

Group 16 was in force in the UK from 15 July 2020 until 31 March 2022. It was therefore in effect for the VAT period that is relevant for this appeal.

The wording of Group 16 is (apart from the final wording about Items 1 or 2 in Group 13 of Schedule 9) effectively identical to Item 7. The UK was not obliged to implement Item 7, because Member States are given an option as to whether to introduce reduced rates. It is, however, clear that by introducing Group 16, the UK was implementing Item 7. This means that, in accordance with the Marleasing principle, we must interpret Group 16, so far as possible, in the light of the wording and purpose of the VAT Directive to achieve the result pursued by that Directive (see HMRC v IDT Card Services Ireland Ltd [2006] STC 1252 at [79], Re Olympus UK Ltd [2014] Bus LR 816 at [45] and VW v Secretary of State for Work and Pensions (PC) [2014] UKUT 573 (AAC) at [24]).

In Twycross Zoo v HMRC [2007] V&DR 425 (“Twycross Zoo”), the VAT Tribunal considered whether “animal encounters” offered by a zoo constituted an exempt supply of a right of admission to a zoo. An animal encounter involved a member of the public, who would already have paid an admission fee to the zoo, making an additional payment to experience a closer contact with certain animals. The Tribunal decided that the animal encounters fell outside the scope of the exemption. At [22] the Tribunal said:

“Having defined the nature of the animal encounter, the second question is how should the “right of admission” be construed. I accept Ms Whipple’s contention that one looks to the plain and ordinary meaning of the wording. Member States were given a wide mandate and the UK Government exempted the right of admission, nothing more and nothing less. In my view, what is exempted is the physical admission to the Zoo. The notion of admission cannot in its ordinary meaning be extended to encompass all the cultural services offered by the zoo.”