In Paradise Wildlife Park Limited v HMRC [2023] TC08729, the First Tier Tribunal (FTT) rejected the appellant's claim that the costs incurred in the building of its walk-through dinosaur exhibit and lion enclosure were zero-rated for VAT as the exhibit was not a building and not intended solely for use for a charitable purpose.

  • In 2017, the Zoological Society of Hertfordshire (ZSH) engaged Paradise Wildlife Park Limited (PWP) to build a lion enclosure, a shop and an outside dinosaur exhibition at the Paradise Wildlife Park in Hertfordshire.
  • PWP zero-rated the construction services provided, on the basis that it was in the course of the construction of a building intended for use solely for a Relevant charitable purpose.
  • HMRC raised an assessment on the basis that the construction services were standard-rated, contending that ZSH was carrying on a business, in which the new constructions were used.
  • PWP conceded that the construction of the shop should have been standard-rated but appealed the assessment for the lion enclosure and dinosaur exhibit.

The issues before the FTT were:

  • Was ZSH carrying on a business?
  • If yes, were the two areas of construction used in the business?
  • Was the outside exhibit a building?

 The FTT examined the case law on what was required for a business and Wakefield College v HMRC [2018] EWCA Civ 952 in particular:

  • The way an entity operates is important, irrespective of its purpose.
  • Charges based on cost, which are significant in absolute terms or by reference to costs, suggest economic activity.
    • The park aims to cover the operating costs plus a margin for future improvements through the admission fee.
  •  If there is a market in which similar services are supplied by third parties on a commercial basis and the entity operates in a similar manner, this would suggest economic activity.
    • In 2016, there was a reorganisation that aimed at bringing the management of the park into line with other operators.
  • If the activity is part of the entity's principal function and is conducted seriously on a regular basis, it would suggest economic activity.
    • ZSH is clearly involved in educational and conservation activities but the park is a significant part of its activities. Many of the other functions are delivered through the park.

For the construction services to be zero-rated they would have to be for buildings 'intended for use solely for a non-business purpose'. Whilst the lions' den had a conservation function and the dinosaur exhibit an educational one, they also make the park a more attractive place to visit and so have a business purpose as well.

As an aside, the issue of whether the dinosaur exhibit was even a building was discussed. 'Building' is not defined in statute but the FTT held that whilst a permanent structure, the exhibit was in no sense a building.

The FTT held:

  • ZSH was carrying on a business.
  • The enclosure and exhibit were intended for use in the business at least in part.
  • The exhibit was not a building.

The appeal was dismissed.

Useful guides on this topic

Starting in business: VAT
One of the first decisions to make when starting in business is whether or not you should register for VAT.  Am I running a business for VAT purposes and if so, when do I register?

Land & Property: Relevant residential & relevant charitable purpose
What are the VAT rules for land and property that is used for a relevant residential purpose or a relevant charitable purpose? What are the clawback provisions affecting a change of ownership or use? 

Part-funded courses are a business for VAT
In Wakefield College v HMRC [2018] EWCA Civ 952, the Court of Appeal decided that income from students who are partly subsidised and pay a small additional fee for courses amounted to a business activity. This meant the construction of a new building could not be zero-rated.

External link

Paradise Wildlife Park Limited v HMRC [2023] TC08729

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