Decision for zoos in £30 million landmark VAT case

Martin Scammell, VAT partner at Ernst & Young, says: "We are delighted at the Court's decision and it points towards an eventual victory for our clients. The Zoological Society of London (ZSL, which owns London Zoo and Whipsnade Wild Animal Park) has been at the forefront of a six year battle with HM Customs, and it has been a key member of a consortium of zoos represented by Ernst & Young. The zoos potentially stand to be repaid an estimated £30-40 million in VAT that has been overpaid since 1 January 1990, (when the UK was obliged to implement the relevant legislation).
The basis of the case was a challenge to HM Customs' interpretation of the European legislation that exempts cultural services from VAT provided the bodies supplying the service fulfil certain conditions. The legislation states that a body is eligible for the exemption if it cannot distribute any profit; applies any profit it does make to the continuance and furtherance of its activities and should "be managed and administered on a voluntary basis". It is the meaning of this latter phrase and its application to London Zoo that was in dispute.
Martin adds: "ZSL is a charity that is managed and controlled by a Council of Trustees governed by a Royal Charter. The Trustees of ZSL fulfil their role on an entirely voluntary basis. Clearly ZSL employs staff that discharge the directions of the Council, but HM Customs & Excise contended that because ZSL has salaried employees it cannot be said to be managed and administered on an essentially voluntary basis. The Court has now dismissed the notion that the presence of salaried staff prevents exemption from applying, provided those staff are not making policy decisions. Of course, this test will now have to applied to London Zoo and the other zoos in the consortium but our hope is that Customs and Excise will be will to resolve the matter quickly rather than embarking on a further round of protracted negotiation or legal proceedings.
Mike Bird, Director of Finance for the Zoological Society of London said "This is a very positive and promising decision for ZSL, which has come after a long and complex case. It will be an important financial boost that will enable us to invest further in both London Zoo and Whipsnade as well as our scientific and international conservation work."
Les Allen, of Ernst & Young, who began the legal process with a win for the zoo in the VAT Tribunal, says: "This result could be good news not only for the zoo but for numerous other cultural organisations such as museums, theatres and galleries. Many of these organisations stand to receive significant refunds of overclaimed VAT."

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Rayner Peett, National Media Relations 020 7951 3534