Kids' driving experiences not like a funfair for VAT

In The Young Driver Training Limited v HMRC [2023] TC08748, the First Tier Tribunal (FTT) found that the appellant was not making supplies that included the right to admission and so was unable to take advantage of the temporary reduced VAT rate introduced during the pandemic.

• The appellant, The Young Driver Training Limited (Young Driver) was established in 2009 and provides ‘driving experiences for under 17 years olds’. The main component of the business is providing children under the age of 17 with driving lessons on private land, such as large car parks and exhibition centre grounds.
• Admission into the driving area is reserved for those driving. Anyone accompanying the under 17-year-old has to wait in a separate area.
• During the pandemic, the government introduced a temporary Reduced rate of VAT of 5% to help the hospitality trade.
• When the announcement was made, the appellant changed the SIC code and Business Activity on the VAT registration. The SIC code changed from 96090 (Other personal services n.e.c.) to 93210 (Activities of amusement parks and theme parks). The business activity changed from “Other Personal Services not elsewhere classified- Provision of driving lessons off the highway for under 17-year-olds” to “Driving experience for under 17-year-olds”.
• The business started applying the reduced rate from July 2021, although their adviser was not able to confirm this was the correct treatment with HMRC.
• In May 2021, HMRC issued assessments for the VAT periods 09/2020 and 12/2020 and a decision in relation to the period 03/2021, where the reduced rate was rejected. This was subject to a Statutory Review which upheld the rejection.
• Young Driver Appealed to the FTT.

The FTT held that whether or not the business could use the reduced rate depended on the Supplies falling within Group 16, Part II, Sch 7A VATA 1994. In order to fall within this group, the supplies must meet two criteria:

• The supply must be of a ‘right of admission’.
• The venue or event must fall within the list provided in Group 16, or be of sufficient similarity.

In considering the supplies of Young Driver, the FTT found:

• The supply was not a right of admission. Instead, it was a package of benefits, including tuition, supervision and a vehicle. There was admission to a fenced-off area, but without the rest of the package, there would be no experience.
• Whilst the experience was not driving lessons to the extent that the child could pass the actual driving test, they were still learning the rules of the road and the main supply was clearly that of driving tuition.
• Even if there was a right of admission, the venue or event needed to fall within Group 16 (or similar) and it did not. The appellant contended that the experience was similar to a funfair or circus. Using the Organisation for Economic Co-operation and Development (OECD) definitions, the court held that these were places where the customers could wander freely and view/watch/take part in a number of attractions. This is not the case for the driving experience. Moreover, the experience is not similar to a dodgems ride.

The appellant also argued that the principle of fiscal neutrality applied, which seeks to prevent similar goods and services which are in competition with each other from being treated differently for VAT. In order for the principle to apply, the court would need to find that the driving experiences were viewed as similar to those in Group 16 by the typical consumer. As it had already been decided that the two were not similar, this argument was rejected.

The appeal was dismissed.

Useful guides on the topic

Covid-19: Reduced rate VAT 
The temporary cut to the rate of VAT on food, accommodation and entry fees to attractions from 20% to 5%, introduced in July 2020, is extended by Finance Act 2021 until 30 September 2021. An increased reduced rate of 12.5% applies between 1 October 2021 and 31 March 2022. 

How to appeal an HMRC decision
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Goods or services for VAT
What are goods and what are services for VAT? The answer may have an impact on the time of supply, the place of supply and in some cases the rate of the supply. The answer is not always as straightforward as it may seem.

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The Young Driver Training Limited v HMRC [2023] TC08748