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Go City Ltd v Revenue and Customs (VAT - vouchers - London Passes - assessments raised on basis that Appellant making standard rated supply of "sightseeing packages" )
Factual and Procedural Background
The Appellant, formerly known as Company A, sells two types of sightseeing Passes in The City, namely the London Pass ("LP") and the London Explorer Pass ("LEP"). These Passes grant purchasers access to a range of Attractions, including buildings, transport, and discounts, at a price discounted relative to gate prices. The LP and LEP have been sold since 1999 and 2017 respectively. The Appellant's VAT treatment of these Passes has been subject to prior litigation and changing HMRC positions over time.
Initially, HMRC accepted the Pass as a face value voucher under the Value Added Taxes Act 1994 ("VATA"), but later reversed this view, leading to appeals and tribunal decisions. The EU Voucher Directive (2016) was implemented in the UK in 2019, clarifying VAT treatment of vouchers but excluding instruments functioning as tickets.
Following HMRC's 2018 position that the Passes were tickets and thus standard-rated supplies, the Appellant restructured its arrangements in 2019 with new contractual terms involving credits packages and revised agreements with Attractions.
HMRC issued four VAT assessments between March and September 2021, challenging the Appellant's VAT returns for periods 03/19 through 12/20. The Appellant appealed all assessments and a related Liability Decision. The Tribunal heard evidence from witnesses representing both parties and considered extensive documentary material, including internal HMRC communications and procedural disclosures.
Legal Issues Presented
- Whether the First and Second Assessments were invalid as out of time because it did not appear to HMRC that the Appellant's VAT returns were incorrect at the time of issue, thus failing the condition in VATA s 73(1).
- Whether the Passes are outside the scope of VAT as Multi-Purpose Vouchers (MPVs) under the Voucher Directive and VATA Schedule 10B, or whether they are instruments functioning as tickets and thus standard-rated supplies.
- Whether the Appellant's reconfigured contractual arrangements place the Passes outside the scope of VAT.
- Whether the entire amount paid by customers for Passes should be allocated as consideration for supplies made, particularly where Passes expire with unused credits.
Arguments of the Parties
Appellant's Arguments
- The First and Second Assessments are invalid as they were issued without HMRC having formed a view that the VAT returns were incorrect, and thus were out of time.
- The Passes are MPVs under the Voucher Directive and Schedule 10B, and are therefore outside the scope of VAT.
- The Passes are not "instruments functioning as tickets" because they do not confer a specific, ascertainable entitlement at the time of purchase; instead, they grant rights to a range of services to be selected later.
- The Appellant's new contractual arrangements, involving credits packages and on-supply of admission rights, reflect the economic reality and support the VAT treatment of the Passes as outside the scope.
- The VAT chargeable event occurs when credits are redeemed for entry to Attractions, not at the time of Pass purchase, consistent with relevant case law (Macdonald Resorts Ltd v HMRC and Findmypast Ltd v HMRC).
- The Appellant's method of allocating consideration only to used credits is correct; unused credits do not constitute consideration for supplies and should not be included in VAT calculations.
Respondents' Arguments
- The First and Second Assessments were valid and issued in accordance with HMRC procedures to protect revenue before time limits expired.
- The Passes function as tickets and thus do not qualify as vouchers under the Voucher Directive and Schedule 10B.
- The entire amount paid for the Passes should be allocated as consideration for supplies made, with no unallocated sums, to prevent tax leakage.
- The Appellant's contractual restructuring does not change the VAT treatment; the Passes remain standard-rated supplies of sightseeing packages.
- Protective assessments are a recognized practice to safeguard HMRC's position pending final decisions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Leisure Pass Group Ltd v HMRC (2007) VAT Decision 3340 | Definition and VAT treatment of face value vouchers under VATA Sch 10A | Confirmed that the Pass initially did not meet voucher requirements but later amendments made it a voucher outside VAT scope. |
| Macdonald Resorts Ltd v HMRC (Case C-270/09) | VAT chargeability linked to conversion of points rights into specific services | Applied to the Appellant's credits packages, confirming VAT arises when credits are redeemed, not at purchase. |
| Findmypast Ltd v HMRC [2017] STC 2335 | VAT chargeability linked to redemption of PAYG credits for specific services | Supported the view that VAT arises on use of credits, not on their purchase, reinforcing Appellant's position. |
| DSAB Destination Stockholm AB v Skatteverket (Case C-637/20) | Definition and VAT treatment of multi-purpose vouchers and distinction from tickets | Provided authoritative EU guidance that similar city cards are MPVs, not tickets, supporting Appellant's classification. |
| Aria Technology v HMRC [2020] EWCA Civ 182 | Objective test for whether a document constitutes a VAT assessment | Distinguished from the statutory condition that HMRC must have formed a view that returns are incorrect before assessment. |
| Classicmoor Ltd v C&E Comrs [1995] V&DR 1 | Timing of when an assessment is "made" for statutory purposes | Considered procedural aspects but did not require authorisation for an assessment to be valid. |
| Eyesave Ltd v C&E Comrs (2000) VAT Decision 16756 | Importance of countersignature date in assessment validity | Confirmed countersignature date as assessment date where applicable but did not make it a precondition for validity. |
| Babber v C&E Comrs [1991] VATTR 268 | Assessment date linked to countersignature | Supported that countersignature marks assessment date but did not negate validity before authorisation. |
| Courts plc v C&E Commrs [2004] EWCA Civ 1527 | Internal procedures for making assessments are not prescribed by statute | Confirmed that making an assessment is an internal HMRC matter, not strictly defined by statute. |
| Rogers and Shaw v HMRC [2019] UKUT 406 (TC) | Meaning of "the Commissioners" includes HMRC officers collectively | Supported that the view forming requirement may be met by any relevant HMRC officer. |
| Jersey Choice Ltd v Her Majesty's Treasury [2021] EWCA Civ 1941 | Accrued rights under EU law preserved post-Brexit | Supported application of EU law principles to pre-Brexit periods relevant to this case. |
| Lipton v BA Cityflier [2024] UKSC 24 | Interpretation of EU law rights post-Brexit | Confirmed retained EU law applies to pre-Brexit events, supporting use of EU Voucher Directive principles. |
| HMRC v National Exhibition Centre Ltd [201] UKUT 0023 (TCC) | Binding effect of Findmypast decision | Confirmed Findmypast is binding precedent on VAT treatment of credits schemes. |
| R (oao Gloucestershire Hospitals NHS Foundation Trust) v HMRC [2023] UKUT 28 (TCC) | Usefulness of post-Brexit CJEU judgments for interpreting retained EU law | Supported reliance on DSAB judgment for construing Voucher Directive provisions. |
| M-GbR v Finanzamt O (Case C-68/23) | VAT treatment of distribution or promotion services in multi-purpose voucher chains | Distinguished from Appellant's case as no such services were supplied; did not affect allocation of consideration. |
| Halifax plc v HMRC [2006] Case C-255/02 | Abusive practices in VAT law | Not engaged in this case; no abusive practice alleged by HMRC. |
Court's Reasoning and Analysis
The Tribunal conducted a detailed analysis of the statutory framework, relevant EU law, and case law, applying these to the facts and evidence presented.
Regarding the First and Second Assessments, the Tribunal found that at the time of their issuance, no HMRC officer, including the assessing officer, had formed the requisite view that the Appellant's VAT returns were incorrect. This was supported by contemporaneous documents, the Technical Advice Request (TAR), and witness evidence. The assessments were issued solely to protect HMRC's position before statutory time limits expired, and were not enforceable until later. Consequently, the Tribunal held these assessments invalid as out of time under VATA s 73(1) and s 73(6).
On the question of whether the Passes are vouchers or tickets, the Tribunal interpreted the Voucher Directive and UK implementing legislation (Schedule 10B). It found that the Passes meet the definition of multi-purpose vouchers (MPVs) because they confer rights to a range of goods and services, with VAT chargeability uncertain at the time of issue. The Tribunal rejected HMRC's contention that the Passes are instruments functioning as tickets, noting that the statutory phrase is not found in the Directive, and that the Passes do not confer specific, ascertainable entitlements at purchase. The Tribunal relied on dictionary definitions, Recital 5 of the Directive, and the CJEU judgment in DSAB, which supported the classification of similar city cards as MPVs.
Regarding the Appellant's new contractual arrangements, the Tribunal found that the Appellant supplies a credits package, whereby customers use credits to obtain rights of entry to Attractions. This structure aligns with the economic and commercial reality and is consistent with relevant case law, particularly Macdonald Resorts and Findmypast, which establish that VAT arises when credits are redeemed, not at purchase.
On the allocation of consideration, the Tribunal held that the Appellant's method of allocating consideration only to used credits is consistent with the Voucher Directive, Recital 11, and case law. Unused credits do not constitute consideration for supplies and thus remain unallocated for VAT purposes. The Tribunal rejected HMRC's submission that all amounts paid must be allocated and subject to VAT, finding no direct and immediate link between the total payment and supplies made where credits remain unused. The Tribunal also found HMRC's approach would cause distortions and was inconsistent with the legislation and case law.
Holding and Implications
The Tribunal's final decision is:
The First and Second Assessments are invalid and set aside as out of time because HMRC had not formed the necessary view that the Appellant's VAT returns were incorrect at the time of issue.
The Third and Fourth Assessments and the Liability Decision are set aside because the Passes are multi-purpose vouchers outside the scope of VAT under the Voucher Directive and UK law, and because the Appellant's method of allocating consideration is lawful.
The Appellant's appeal is allowed in its entirety. The decision confirms that multi-purpose vouchers supplying a range of services with uncertain VAT chargeability at issue date are outside VAT scope until redemption, and that protective assessments issued solely to preserve HMRC's position pending decision may be invalid if no view of incorrect returns exists. No new precedent is established beyond application of existing principles to the facts.
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