The North of England Zoological Society, the charity which runs the facility, was seeking a ruling on the extent to which it is entitled to recover input tax. The zoo, which is the UK’s largest and most visited, houses some 8,000 animals in 170 buildings and includes animal exhibits, shops, restaurants, and administration offices.

 It is a partially exempt trader, but argued that it was entitled to recover input tax relating to ‘animal related costs’ as these represented a cost component of taxable supplies, including catering and retail supplies, as well as the exempt admission income.

 For its part, HMRC contended that the animal related costs are a cost component of the exempt admission charges, but only some of the taxable supplies. In particular the tax authorities said that animal related costs are not a cost component of supplies of catering and merchandise. As a result, HMRC raised a total of £1.3m in assessments for the period 2006 to 2013 to recover input tax credit to which it claimed the zoo was not entitled.