The recent Greenisland Football Club First Tier Tribunal case sheds more light on HMRC’s approach to zero rating for the construction of new ‘relevant charitable purpose’ (RCP) buildings.
The legislation provides for zero rating for such buildings, and defines RCP:
(6) Use for a relevant charitable purpose means use by a charity in either or both the following ways, namely—
(a) otherwise than in the course or furtherance of a business;
(b) as a village hall or similarly in providing social or recreational facilities for a local community.
The case follows the Upper Tier decision in Caithness Rugby Club. The HMRC representative tried to differentiate Greenisland from Caithness. In fact, its case may have been stronger!
Revealingly, HMRC argued that Caithness was decided wrongly. Why then has it not been appealed? This also explains why HMRC guidance (Notice 708) has not been updated. Para 14.7.4 retains its pre-Caithness wording.
HMRC also argued that Greenisland was operating a business, since the building generated income. This is a simple failure to understand a Village Hall. A Village Hall usually does generate income for room hire, from regular User Groups and often private bookings. This ‘business activity’ does not breach the RCP test in Note 6(b). (Rental income does breach the RCP test in Note 6(a).)
I have found that Caithness is very helpful for charities which wish to develop property for community use.
The Greenisland decision is here: http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10288