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BKL reports on a recent VAT case that turned on whether free really means free...

There is an indoor ski slope in Glasgow. There is no entry charge to the ski centre and, technically, no charge to use the ski slope.

You can reach the top of the slope for free if you have the energy and the inclination to “wade through snow at a gradient of 15 degrees while carrying ski or snowboard equipment.” It’s physically tiring, but (according to the Upper Tribunal in Snow Factor Ltd v HMRC [2020] UKUT 0025 (TCC)) about 1% of users nonetheless do this.

They are primarily “Nordic skiers who use special skins on their skis to allow them to move uphill, and park and freestyle customers who tackle jumps, bumps and berms created for them on the slope.” And canny customers with lots of energy and an eye to thrift, we suppose.

Most people, however, pay to use a ski lift to reach the top of the slope. And the question before the Tribunal was as to the VAT treatment of the charge made for use of the ski lift.

The law provides that charges for use of a ski lift are subject to VAT at a reduced rate of 5%; but the reduction doesn’t apply if, broadly, the ski lift is located within a place which charges for admission.

HMRC had persuaded the First-tier Tribunal that the reduced rate did not apply, arguing that what the customer was in reality buying on purchasing a ski lift ticket was access to the ski slope: that was a standard-rated supply.

The Upper Tribunal thought that, on the facts of the case, that analysis could not stand. The fact that the ski slope (and the other facilities available) could be (and on occasion were) used without payment inevitably meant that in truth the only thing being supplied in return for payment was the use of the ski lift. And, since there was no charge for admission to the facility, the reduced rate was not excluded.

So, one reflects, it turns out that Snow Factor Ltd was in effect saved from a VAT assessment by the actions of those of its “customers” who have chosen to use its facilities without paying anything for them.

Who said VAT wasn’t bizarre?