David Finnamore t/a Hanbridge Storage Services v HMRC [2011]

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03 June 2011

The key issue in this appeal was whether a business that provided storage facilities for property belonging to third parties, provides a supply of services subject to VAT or whether the supply fell within item 1 of Group 1, Schedule 9 of VATA 1994, in which event the supply was exempt for VAT purposes. 

Background

David Finnamore (the "Appellant") traded as Hanbridge Storage Services ("Hanbridge"), a sole trader which provided storage facilities by supplying containers which were located on land which he owned.  The containers were large metal containers, the type which are commonly seen on lorries or transported by ships.  The containers were movable, although specialist lifting gear was required to move them from place to place.

Customers who wanted to use the containers signed a standard form rental agreement with Hanbridge, accurately described in the Tribunal's view as a "Licence Agreement" (the "Agreement").  The Agreement outlined that provided Hanbridge were paid, the customer was  licensed to use the identified unit for the storage of goods in accordance with the Agreement.  It was also relevant to note that attached to the Agreement was a plan of the site, which identified in red the storage container allocated to the customer.

Judgment

The Tribunal was requested to consider whether the supply of storage facilities under the Agreement was an exempt supply under item 1 of Group 1 of Schedule 9 of the VATA 1994 ("the grant of any interest in or right over land or any licence to occupy land").   

The question before the Tribunal was whether a storage facility agreement between the customer and Hanbridge was primarily a licence to occupy land, or primarily a contract for the storage of goods within a metal container.  The Tribunal commented that it was also essential to ask whether the supply of the storage services by Hanbridge were to be seen as a single supply for VAT purposes.

From a property law perspective, there was no doubt that the contract between Hanbridge and a customer involved Hanbridge granting a right to occupy a defined parcel on land on the site.  Hence there were implied rights allowing the customer to gain access to and from that defined piece of land.  The Tribunal therefore accepted that the greater part of the licence fee was for the occupation of the land on which the storage unit rested, rather than the provision of the metal storage unit itself. 

The Tribunal agreed with the Appellant that the supply under the Agreement was a single supply for VAT purposes, as it accorded with common sense, and the fact that the predominant nature of the supply of the storage facilities was the provision of the licence to occupy the land.   

The Tribunal decided that the Appellant was supplying an interest in land, not mere storage facilities, and so, was VAT exempt, by reason of Item 1 of Schedule 9 of the VATA 1994. 

Analysis

The supply of storage facilities under a licence agreement (provided on a defined parcel of land) can be considered an exempt supply for VAT purposes. 

Conclusion

It is an interesting judgment that a licence agreement for storage facilities can be VAT exempt under Item 1 of Schedule 9 of VATA 1994. 

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