Legal advice - The A-Z of TEN's

Are the general public not getting bored with reading about the Licensing Act 2003? Not in the opinion of The Daily Telegraph.

Under the headline "A licence for raves with no chance to object" the home affairs editor portrayed the new temporary event notices (TENs) as a recipe for disaster with the potential for raves, parties or festivals lasting up to four days without local residents being able to object. Of course there is no mention that, with special orders of exemption (SOEs), the equivalent of TENs under the Licensing Act 1964, local residents cannot object as it is.

In reality, it is important to be aware of two crucial differences between the new and old regimes. SOEs are only granted for special occasions. What counts as "special" varies from court to court (except in London where the police alone deal with applications). Typically the definition is wide ranging: birthdays (21st, 30th, 40th etc), wedding anniversaries, bank holidays, televised football matches and retirement parties. TENs do not require such a pretext and should be more flexible in operation. In practice, however, some rather dubious SOEs were, and indeed still are, granted, especially if there is a charitable element. The majority of events covered by TENs will, no doubt, have also been granted under the Licensing Act 1964. With TENs you are restricted to a capacity of 499 (including staff) and a maximum of 12 events per premises per year. However, under the old system there was no limit on the number of people that could attend Vera and Rupert's diamond wedding anniversary party provided that the capacity of the venue was not exceeded, nor was there a limit on how many of the said parties you could have each year.

If your premises has a capacity of over 499 or you normally have more than 12 SOEs a year, it will be necessary to apply to vary your premises licence to reflect this. I would suggest that you apply to have wording such as: "On no more than [ number ] occasions per calendar year and following [ number ] days' notice to be given to the police, the hour for the provision of licensable activities currently provided at the premises may be extended to such time as agreed with the police, the police having the power to veto any such application" placed on your licence.

While the replacement of SOEs with TENs is unlikely to have a significant impact, it is important to be aware of the new regulations to ensure that you do not fall foul of the new regime. Further details can be found at www.culture.gov.uk.

VAT really counts.​

A recent Court of Appeal ruling reversing an earlier decision of the High Court may be of interest and of concern to publicans whose leases include an element of turnover rent, writes Graeme Keeler. This is a popular system of rent for many high turnover sites on busy high streets and shopping centres, which allows for a basic rent which is then topped up by a percentage of turnover.

The case in question, Debenhams Retail plc v. Sun Alliance & London Assurance Ltd, focused on whether the turnover figure used to calculate the rent should include VAT. Although it featured a store, the outcome of the case could still have effects in the licensed trade.

The lease was granted in 1965, pre-dating the introduction of VAT, and included a provision for part of the rent to be equivalent to a certain percentage of turnover, with turnover defined as "gross amount of total sales". At the time, purchase tax was levied on wholesalers, which would not have shown in Debenhams' accounts, but would have been included in the price of goods it purchased and also in the calculation of turnover. VAT was introduced in 1973, which places the final burden of the tax on the consumer and would not show up in Debenhams' accounts as it is paid to the HM Revenue and Customs.

Debenhams continued to pay the turnover rent on the basis that turnover did include VAT until 2003 when it asked the High Court for a declaration that the calculation of the turnover rent should not include VAT.

The High Court ruled in favour of Debenhams on the basis that the definition of turnover should be taken in a commercial context. The judge reasoned that the basis of the turnover rent was to share the commercial risk between landlord and tenant and that the inclusion of VAT could not be consistent with that.

The Court of Appeal agreed that in construing the lease, its commercial context should be taken into account, but the bench came to a different conclusion with regard to VAT. The main judgment concluded that the only thing that would have been in the minds of those who negotiated the terms of the lease was money.

The fact that VAT did not appear in the final accounts of Debenhams had no bearing, nor did the fact that variations in the rate of VAT would bring subsequent variations in turnover rent. Turnover rents are not, as stated in the High Court decision, a way of sharing commercial risk, rather a way of protecting rental income from inflation.

VAT should be included in the turnover rent calculation as on this basis the commercial context of "gross amount of total sales" could only mean this. The court said it would be inconceivable to imagine that the parties to the lease in question would not have meant a tax that replaced purchase tax, and which was also included in the price paid by consumers, to be included in the calculation.

Therefore, publicans with turnover rents and older leases should look carefully at their terms and how VAT has been approached as this decision may open the door to landlords seeking higher rents by requiring it to be included in the calculation, if it is not already. Some landlords may even try to obtain back rent from previous years.