A wildlife park has lost an appeal over a VAT bill in a dispute over whether the construction costs were eligible for VAT exemption, as they had charitable status.
Paradise Wildlife Park (PWP) in Hertfordshire lost a First Tier Tribunal (FTT) appeal against a VAT bill for £411,000 related to the construction of a lion enclosure and walk-through dinosaur exhibit. It zero-rated the construction work on the basis of Schedule 8 Value Added Tax Act 1994 (VATA) that the buildings were intended for use solely for a relevant charitable purpose.
Outside exhibition
However, HMRC disagreed with this analysis and on 1 May 2020 raised an assessment for £411,641, the amount of VAT at the standard rate on the construction.
The Zoological Society of Hertfordshire charity had approved a plan for PWP to construct the lion enclosure, an outside exhibition called ‘World of Dinosaurs’ and a shop called the Dino Store at Paradise Wildlife Park, between June 2017 and June 2019.
The main contention of the appeal was whether PWP was constructing buildings designed solely for charitable purposes and whether the ‘World of Dinosaurs’, which was an outside exhibition, was a building.
PWP later agreed that the work on the Dino Store should not have been zero-rated, although it argued that both the lion enclosure and the ‘World of Dinosaurs’ were.
Educational services
Lynn Whitnall, CEO of Paradise Wildlife Park, said that the Zoological Society of Hertfordshire was a charity, providing educational services and enabling specific fundraising projects for conservation.
As far as funding, she added that money came from charges for park admission and animal experiences, in addition to legacies and donations. About 90 per cent of the income came from admissions and other commercial activities, with the remaining 10 per cent taking the form of donations.
But as the park had an admission fee for access to the wildlife park and all the attractions, including the lion enclosure and dinosaur exhibit, HMRC argued that it should be deemed a business under Section 94 VATA.
This states that a business includes ‘any trade, profession or vocation’ and specifically states that ‘the admission, for a consideration, of persons to any premises’ is deemed to be the carrying on of a business.
Charitable aims
It stressed that it did not dispute the charitable aims and objectives of the Zoological Society of Hertfordshire. However, the fee paid by visitors to the park was charged for admission and that was categorised as a business activity.
Because charging a fee for admission to premises is a business activity under S94 VATA, the supply of construction services could not be zero-rated.
The FTT determined that not only was the Zoological Society of Hertfordshire carrying on a business of operating and charging for admission to the park, and that both the lions’ enclosure and the World of Dinosaurs were intended for use at least for that business, but also that the World of Dinosaurs was not a building.
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