VAT on Market Lettings – Update

NABMA CEO, Graham Wilson OBE provides an update on the ongoing campaign against the potential introduction of charging of VAT on market lettings.

NABMA exists to assist market operators deal effectively with national issues. In the past we have had success with our campaigns on retaining market rights, securing business rates relief for market traders and getting markets recognised in planning advice. The current, and very important issue for all market operators, is the potential imposition of VAT on market lettings.

The background to the current situation is the decision of The Upper Tribunal which has overturned the First-Tier Tribunal decision in Zombory-Moldovan t/a Craft Carnival, holding that stalls at an antiques or collectors fair are liable to VAT rather than licences to occupy land and exempt from VAT. The main reason for the change in approach was the additional services such as advertising and security that were available to the traders and therefore caused the letting to be viewed on a different basis. It was immediately apparent that the criteria applicable in the Carnival Craft case could be applied to market lettings and therefore potential alarm bells began to sound about the impact that this can have on many markets.

Concern was subsequently heightened when Shrewsbury Town Council, Britain’s Favourite Market winners, informed us that they had received a visit from an HMRC Inspector who was looking at imposing VAT liability on their market lettings and collecting VAT charges for the past five years.

At a NABMA seminar, Shrewsbury told us that they were looking at a potential overall liability of £120,000 which would raise serious questions about the future viability of the market. Shrewsbury’s dispute with HMRC continues and we wait to see whether it will lead to a further Tribunal case.

It appears that other markets have been approached by HMRC Inspectors but there seems to be no pattern or logical approach to what is currently been done. What is concerning is that the action being taken to assess potential VAT liability is at odds with current VAT advice and practice.

There is a longstanding Tribunal decision involving Tameside MBC which states that market stall rentals are licences to occupy land and so are exempt from VAT. Current HMRC guidance still clearly states that pitches at car boot sales, stalls at markets etc do amount to a licence to occupy land (para.2.6 of Notice 742). In this respect ‘implementing’ the ‘Craft Carnival’ decision would amount to a change of policy that would need to be the subject of new policy directive applicable from a given date.

NABMA has raised the issue with the All Party Parliamentary Markets Group and Jim Fitzpatrick MP, Chairman, has written to the Treasury expressing our concern. The Treasury has responded acknowledging that the Craft Carnival decision might have an impact on market lettings but seeking to minimise the impact by suggesting that as the majority of market traders will be registered for VAT the impact will be minimal. The Treasury response on this issue shows how out of touch they are because the rather than the majority of traders being registered for VAT the reverse is true with only a comparatively small number being registered.

A meeting has now been arranged with the Treasury for early July, but all markets will want to keep this issue under careful review. At the moment we are advising that you continue to operate in the same way until we are able to get some direction on the issue that can be applied across the country. Whatever the outcome we are keen to ensure that this is no backdating and that any new policy is applied from a future date and can implemented in a consistent way.

If Shrewsbury are viewing the payment of five years VAT liability as a potential death knell to their market, and they are currently running one of the most successful markets in the country, then many more markets will be facing a similar prospect.

NABMA will continue to fight the case for markets. It is occasions like this when the importance of a national markets organisation is fully recognised.

Graham Wilson OBE
Chief Executive,
NABMA

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