Snow Factor operates an indoor winter sports centre in Glasgow, which includes a ski slope and ski lift to transport skiers to the top of the slope. Skiers are charged a fee for purchasing a lift pass, however, unless they book additional services such as skiing lessons, there is no other fees for using the snow dome.
Snow Factor initially charged customers VAT at 20 per cent on its lift passes, which cost around £30 per hour. However, following the introduction of a new VAT relief in April 2013 for passenger transported by cable car and chair lifts, it took the view that the lift passes were eligible for VAT at the reduced rate of 5 per cent. As it did not implement the reduced rate immediately, Snow Factor submitted a claim to HMRC in August 2013 to recover VAT of £20,000 it had overpaid.
HMRC refused the claim on the basis that Snow Factor did not qualify for the reduced rate. The reason given by HMRC was that its lift pass charges fell within an exclusion applying to cable-suspended transport within a place of entertainment, recreation or amusement, where the supplier of the cable car also supplied a right of admission to those facilities.
Snow Factor appealed, arguing that it did not charge for admission, only for a lift pass for those who wished to use the ski lift. The case has now come before the Upper Tribunal which was asked to decide whether the charge for the lift pass was effectively a charge to use all the facilities at the snow dome.
The Upper Tribunal has found in favour of Snow Factor, deciding that the lift pass was eligible for the reduced rate of VAT. Although most skiers purchased a lift pass, some – such as Nordic skiers whose discipline included skiing up as well as down the slope, or freestyle skiers who used the jumps, bumps and berms – did not need to use the lift, so could use the facilities free of charge. This, in the Upper Tribunal’s view was enough to establish that the lift pass charge related to use of the lift and not to the snow dome as a whole.
HMRC has yet to confirm whether it will appeal this decision to the Court of Session.
This case is another example of HMRC attacking the use of VAT reliefs by arguing that a supply is part of a larger activity that is subject to VAT at the standard rate of 20 per cent. Businesses that supply VAT-exempt, reduced- or zero-rate services alongside taxable services should always consider taking advice on their position.