UT/2023/000021 - [2024] UKUT 00334 (TCC)

The Trust’s case is that, even if (as we have found) its provision of services to local authorities was “for consideration” under Article 2 PVD, and “economic activity” under Article 9 PVD, such provision is nevertheless “non-business” because, pursuant to the first paragraph of Article 13 PVD the Trust is not a taxable person. That Article provides as follows:

“Article 13

1.

States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.

However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.

....”

The Trust argues that it is not a taxable person under the first paragraph above because the relevant activities are engaged in “as” a public authority (there is no dispute the trust is a body “governed by public law”).

The relevant interpretative principles for what is meant by a public authority engaging “as” such were considered by the CJEU in Comune di Carpaneto Piacentino and others (Case C-129/88). The CJEU explained (at [15]) (by reference to the equivalent provision of the predecessor legislation) that it was “the way in which the activities [were] carried out that determine[d] the scope of the treatment of public bodies as non-taxable persons” and that in so far as the provision:

“15… makes such treatment of bodies governed by public law conditional on their acting “as public authorities”, it excludes therefrom activities engaged in by them not as bodies governed by public law but as persons subject to private law. Consequently, the only criterion making it possible to distinguish with certainty between those two categories of activity is the legal regime applicable under national law.

16.

It follows that the bodies governed by public law…engage in activities “as public authorities” within the meaning of that provision when they do so under the special legal regime applicable to them. On the other hand, when they act under the same legal conditions as those that apply to private traders, they cannot be regarded as acting “as public authorities”

The subsequent European and domestic jurisprudence on this aspect of Article 13, which had continued to reiterate the “special legal regime” requirement above, was the subject of detailed consideration earlier this year by the Court of Appeal in Northumbria Healthcare NHS Foundation Trust v HMRC [2024] EWCA 177. The issue there concerned the VAT treatment of charges for the provision of hospital car parking facilities by the taxpayer health trust appellant. The Court of Appeal distilled a number of principles, those most relevant to this case being that:

In the course of their submissions, HMRC also suggested that the legal conditions could not be “generic” but had to be specific ones. We were not persuaded that this requirement was reflected in the case-law to which we were referred and note that such requirement was not indicated in the Court of Appeal’s comprehensive summary of the law in this area. Whether a legal condition (generic or specific) had real impact on the way a particular activity was carried out would depend on the analysis of the application of the statutory provision to the facts. The mere general nature of the rule would not exclude it from consideration in the first place.