The Honourable Society of Middle Temple v Commissioners for Her Majesty's Revenue and Customs

Facts

The Honourable Society of Middle Temple, one of the Inns of Court, holds land and buildings at the Middle Temple in London under a Royal Charter dating from 1608. Most of the buildings are let, and the appeal concerned premises let as Chambers to barristers, in respect of which the Society had elected to charge VAT on the rent. Cold water reaches the premises through a network of underground pipes owned by the Society, itself supplied and metered by Thames Water. The supply onward to each tenant is unmetered: the cost is apportioned annually by reference to the area of each lease as a proportion of the Middle Temple, recharged in arrears, and itemised separately from rent on each tenant's quarterly invoice. The lease defines a "Cold Water Charge" payable "by way of further rent", and the tenants have no practical alternative to taking their water from the Society. By letter of 22 May 2009 the Society sought a ruling from HM Revenue and Customs, which replied on 9 June 2009 that the recharge took on the VAT liability of the rent and, the property having been opted to tax, was standard-rated. The Society appealed to the First-tier Tribunal (Tax Chamber), contending that the water was a separate zero-rated supply.