Zoo’s Lion Enclosure and Dinosaur Park Refused Charitable VAT Concession


Charities can, in certain circumstances, benefit from VAT zero-rating in respect of construction costs. However, a case concerning a zoo’s new lion enclosure and dinosaur theme park showed how hard it is to qualify for that concession.

A company engaged to build the attractions by the zoo’s tenant – a zoological society and charity – did not charge VAT on the project on the basis that the concession applied and the works were zero-rated. HM Revenue and Customs, however, asserted that the project was subject to standard-rate VAT. A six-figure VAT assessment was accordingly raised against the company.

Ruling on the company’s challenge to that assessment, the First-tier Tribunal (FTT) noted that the zoo performs a valuable educational and conservation role. Earning about 90 per cent of its income from public ticket sales, and the remainder from donations, it is not motivated by profit. Its aim is to cover its costs whilst generating some surplus to pay for future improvements to its facilities.

Rejecting the appeal, however, the FTT noted that the concession contained in the Value Added Tax Act 1994 is narrowly drawn and applies only to construction services supplied in the course of constructing a building intended for use solely for a relevant charitable purpose. It was not, therefore, available if the new attractions were constructed for any business purpose whatsoever.

Section 94 of the Act defines a ‘business’ as any trade, profession or vocation and specifically states that charging admission fees to any premises is deemed to be a business activity. Regardless of the absence of a profit motive, the zoo’s reliance on ticket sales brought it within that provision. Its annual turnover of about £5 million and its prudent, businesslike management also indicated that it was engaged in economic activity.

The FTT acknowledged that the lion enclosure provided an improved, modern home for the zoo’s big cats and had a positive effect on the charity’s conservation work. The dinosaur attraction had an educational function. Both, however, made the zoo a more attractive place to visit and thereby performed a role in the charity’s business activities. Neither was intended for use solely for charitable purposes.

The open-air dinosaur attraction, which leads visitors on a Jurassic woodland walk, was not, in any event, a ‘building’ to which the concession could apply. Although it had been ‘built’ and was a permanent structure, it had no enclosure, walls or roof. The FTT noted that no one looking at it would naturally describe it as a building.

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