Words and Phrases - "hotel"

The owner of a property in Mayfair, London that had been converted into 49 residences, agreed with purchasers that, in consideration for a lump sum, each purchaser (a "member”) would have the right, after making a reservation, to use a residence of the particular quality level (1 to 5) for which they had paid, for up to 21 days a year during the term of approximately 50 years (plus for a further 14 nights on payment of a modest charge). Members, when in occupation had access to the amenities of a boutique hotel, e.g., concierge, internet room, daily housekeeping.

The applicable Directive exempted “the leasing or letting of immovable property”, but excluded from that exemption (in Item 1(d)) “the provision of accommodation … in the hotel sector or in sectors with a similar function.”

Newey LJ noted that although, if all the members exercised their rights to the full 21 nights in a year, not all of them could be served, this was a “highly theoretical” rather than a “real” potential, and found (at para. 34) that the reservation system should be seen as “facilitative” rather than as “introducing conditionality such as to make the land exemption unavailable.” However, having regard to the jurisprudential doctrine that “the ‘leasing or letting of immovable property’ is ‘usually a relatively passive activity linked simply to the passage of time and not generating any significant added value” (para. 36) and that hotel-like services were provided to the members, that exemption was not available.

Although it was thus unnecessary to consider the Item 1(d) exclusion, he nonetheless found that the Upper Tribunal should not have interfered with the finding of the First-Tier Tribunal that indicated that such exclusion applied, stating (at paras. 58-59):

The fact that Membership gives "the flexibility to enjoy short stays of a stated maximum amount each year, in an environment similar to a hotel and with the services which can be expected in a hotel" … was surely something that the FTT could properly take into account in arriving at its assessment. …

Miss Hall [for the HMRC] did not suggest that the CJEU has ever held that the grant of a right to short-term sleeping accommodation in an establishment similar to a hotel cannot fall within the exclusion from the land exemption … merely because the right is to last for an extended period. Nor does it seem to me that the fact that such a right is of a long-term nature should necessarily preclude application of the exclusion. To my mind, the duration of the right is not of itself determinative but rather a factor which can properly be taken into account.