The central issue was whether the London Pass (the pass) issued by the appellant fell within the definition of ‘face-value voucher’.

The pass was a credit card size voucher containing a microchip. It was sold to visitors to London and entitled the holder to visit without further charge any of approximately 55 attractions ranging from historic houses to museums and galleries. In addition to free entry, the pass enabled the holder to take advantage of discounts on goods and services available at specific attractions. The appellant entered into a contract with the operator of each attraction and for each entry by the holder of a pass, the appellant paid the operator between 60 and 80 per cent of the normal entry fee. The price of an adult pass varied between £34 for one day to £74 for six days. Admission to some of the attractions was exempt from VAT and to others standard-rated. In monetary terms, the exempt proportion of visits made up some 60 per cent of the total paid out by the appellant.

The appellant submitted that the legislation should be read in its context as a provision designed to avoid double taxation where a supply was capable of being divided into two separate transactions by reason of prepayment. The object of the legislation was to defer a VAT charge until the ‘real’ supply of goods or services was made, at which point the VAT charge would reflect the actual liability and rate applicable. The reason for having a face value was so that VAT could be charged on the issue of the voucher to the extent that it was not merely a prepayment for the real supply. The legislation was also there to avoid a distorted taxable charge on the issue of the voucher when the real supply was exempt. In the appellant's view, the pass was a form of prepayment for admission to attractions which the holder chose to visit. It represented a number of rights to admission at specified attractions, each having a known value, the entry fee, which was recorded in the appellant's computer system. The appellant maintained that the commissioners’ case confused the value of the pass with the value of the goods or services which the voucher represented.

The commissioners submitted that the key defining feature of a face-value voucher was that it stated or recorded a given value which abated according to use. There was no value stated on the pass issued in this case. Even if the attraction entry fees stated in the guide issued with the pass were regarded as recorded in the pass, they were not values, but notional figures which did not represent the value to the holder or to the appellant. The total of the entry fees was not a proxy for the value because the holder would not visit all the attractions. The pass was not a means of prepayment to all the attractions, but merely a right to visit those that the holder saw fit to visit. The commissioners submitted that the pass represented a basket of rights characterised as a single taxable supply of services. They contended that this was similar to the position established in The Highland Council No. 19,542; [2006] BVC 2,693 where it was found that the sale of a privilege card granting use of taxable and exempt leisure facilities was a standard) rated supply.

In the judgment of the tribunal, the legislation recognised three categories of supply. The first was the supply of specific goods or services on which VAT became payable at the time of supply, even though the enjoyment of the supply might be postponed, for example in the case of a theatre ticket. The second category was the supply of making facilities available for use to the extent decided by the purchaser. This was the position in Highland Council, where the supply was of a right to use facilities and was found to be a separate supply of services and, therefore, taxable even though use of the facilities themselves was a mixture of taxable and exempt supplies. The third category was covered by VATA 1994, Sch. 10A, which was an exception to the second category and applied where a voucher represented a right to receive goods or services up to the face value of the voucher. In this case, the consideration for the voucher was disregarded and VAT accounted for on the goods or services for which the voucher was redeemed, according to their individual liability. Here, the time of supply was deferred until redemption of the voucher. The appellant's contention, for which there was no precedent, was that where a voucher was issued and the value of the items comprising the menu were stated or recorded, the supply fell within the third rather than the second category. This effectively treated the pass as a voucher for admission to each attraction to the value of each entry fee and every time the voucher was used the value would be written down by an amount equal to the entry fee.

The tribunal dismissed the company's appeal.

1. The appellant's interpretation of the legislation, although ingenious, stretched the wording too far. The holder of the voucher received a single right to free entry to such attractions as he or she chose to visit and did not receive a series of separate rights to admission to the attractions, each with its own recorded value.
2. The right given to the voucher holder was not that of being able to visit attractions to any stated or recorded value. The entry fee to each attraction was irrelevant to the VAT treatment of the supply.
3. Schedule 10A was limited to cases in which there was a prepayment of a specific amount, which could be redeemed for goods or services of the same value.
4. The tribunal's findings revealed a distortion caused by the underlying exemption of the majority of the attractions being negated by the fully taxable supply of the pass, but that was a necessary result of treating a right as a separate supply of services in situations in which Sch. 10A did not apply.

No. 20,351