The Upper Tribunal (UT) case of Zombory-Moldovan (trading as Craft Carnival)

Background

In the past, the rent of stall at craft fairs have generally been treated as an exempt right over land. In fact, in this instant case, the First Tier Tribunal agreed with the appellant that supplies made to stallholders to sell their goods were the equivalent to a right to occupy land and therefore exempt from VAT.

However, in this decision, the UT overturned this analysis and found that the supply was standard rated.

Decision

The reasons given were that what Craft Carnival supplied went beyond the mere use of a plot of land for a specific period and amounted to the use of a pitch at an event in order to “offer certain goods for sale”.  The test in the previous “Temco” case on this point stated that an exempt supply amounts to a “relatively passive activity linked simply to the passage of time and not generating any significant added value”.  Craft Carnivals had “very real and significant responsibilities beyond the bare provision of an appropriately-sized plot”. This, being a single supply (it was decided) meant that the entire charge was subject to VAT at the standard rate.

The appellant’s website stated that “In addition to the erection of marquees, which are hired for the duration of a fair, Mrs Zombory-Moldovan arranges for the provision 45 of other necessary temporary facilities including portable toilets, electrical generators and security fencing. She also employs between five and seven members of staff to act as ticket sellers and car park 3 marshals. Before the fair takes place Mrs Zombory-Moldovan would have issued a press release and advertised the event in local newspapers and on Craft Carnival’s website and booked a children’s entertainer, such as a magician, to encourage families to attend.”

Impact

Any business or charity which provides similar supplies must review their VAT responsibilities in light of this decision immediately. This case is likely have far-reaching implications for both organisers and those businesses which sell goods in fairs and similar events.  This may encompass; trade fairs, exhibitions and even, possibly, high end car-boot sales type events. We await HMRC’s response to their victory in this case and how wide-ranging they consider the decision to be.

Please contact us if this decision affects your or your client’s businesses.