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Charity not entitled to zero rating

5th Sep 2017
VAT Consultant
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The Tribunal has decided the case of Eynsham Cricket Club, and whether the construction of a new sports pavilion could be zero rated, under item 2 of zero rated Group 5. The Appeal was brought by the recipient of the supply, not the supplies; see para 2 of the decision on this point.

The case was closely argued by Counsel on both sides. In fact, Eynsham’s Counsel acted pro bono. How satisfying to read well-argued legal points, instead of the poor fare so often served up by HMRC Presenting Officers!

The Club clearly had charitable aims. Its Constitution included these objectives:

  • - To promote participation within the local community in healthy recreation by the provision of facilities for the playing of cricket.
  • - To promote the Club within the local community and within Cricket.

Paras 3-5 introduce the four ‘Issues,’ plus sub-issues to be decided.

The most significant argument was whether the Club was ‘established for charitable purposes only’ as required by FA 2010, Sch 6, para 1(1)(a). The difficulty here is the Club had ‘social’ members, who did not participate in sporting activities. Further, the new pavilion provided a bar area with a ‘social purpose.’ Although the Tribunal was satisfied that the predominant purpose was the promotion of amateur sport, there was a subsidiary social purpose, which breached the strict test in para 1(1)(a). The Appeal lost on this point, although the Tribunal did work through the other Issues.

The Club was registered as a community amateur sports club (CASC). The Tribunal commented that the Charities Act 2011, s6 actually prevents a CASC from being a ‘charity.’ The Tribunal addressed this issue (Issue 1(b)) and concluded that, in contrast to the Witney Town Bowls Club case, a CASC is not prevented from being a charity for the purposes of FA 2010. This argument (paras 60 – 71) needs to be carefully unpicked, and may prove useful to other charities arguing for zero rating, etc.

On issue 1(c), the Tribunal described the ‘registration condition’ of FA 2010, Sch 6, para 3 as something of ‘an oddity,’ but held that is was fulfilled.

Issues 2 and 3 addressed the more common questions of Note 6 to zero rate Group 5. This is whether the Club met the ‘relevant charitable purpose’ tests; whether the building would be used ‘otherwise than in the course or furtherance of a business,’ or used ‘as a village hall or similarly.’  The presence of the bar prevented the first condition, but the Tribunal found in the Club’s favour on the ‘village hall’ question. In fact, some of the points discussed (paras 107-115) might be useful in other village hall Appeals.

For Issue 4, the Tribunal briefly considered the question of the EU principles of equal treatment and fiscal neutrality. On the first question, the Club argued that another Cricket Club (Charlbury Cricket Club) had been allowed zero rating; the Tribunal commented that this was because their building was used solely for relevant charitable purpose, and had no bar. On the second question, the Tribunal said that fiscal neutrality applied to the supplier of goods or services, not the recipient, which the Club was. Given that the Appeal was already lost, the Tribunal’s comments on this point are not fully developed.

Comment: why had the Appeal reached this far? Surely the Club could have registered for VAT, since there was taxable business activity of the bar. VAT charged on construction would have been claimed in part. Since the construction commenced in July 2014, there is still time!

You can read the decision here:

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